• The parties to an interest rate swap.
| ||Embedded terms in definition|
| ||Interest rate swap|
| ||Referenced Terms|
| ||Bank market: Is the spot and forward markets for currencies. Here, there are known Counterparties to the transactions.|
| ||Barter: Is a process between Counterparties who exchange goods or services for other goods and services. Generally, this activity is conducted as a cashless transaction.|
| ||Interest rate swap: An exchange by borrowers or asset holders of interest-rate payments at two different rates (often one rate is fixed, the other floating). In a basis swap, both rates are floating.The buyer of the swap agrees to make a number of fixed interest rate payments periodically to the seller on some agreed upon notational amount. In return, the seller agrees to make floating rate interest payment on the same dates to the buyer on the same notational amount.A binding agreement between Counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one party will pay fixed and receive variable.Is the contract whereby one party typically agrees to exchange a floating rate for a fixed coupon rate. There are many variations to this theme. Some of these other swaps can be cross border, fixed-for-fixed, or floating-for floating. The common denominator to these transactions is the swapping of cashflows and not principal amounts. There are predetermined periodic adjustments in cash flow payments.|
| ||Swap: (1) In securities, selling one issue and buying another.|
(2) In foreign exchange, buying a currency spot and simultaneously selling it forward.An arrangement whereby two companies lend to each other on different terms, e.g. in different currencies, and/or at different interest rates, fixed or floating.Is a customized financial transaction between two or more Counterparties. However, banks or brokerage firms often act as intermediaries or assume some of the risk of the total transaction as well. A swap is engineered between counterparties who agree to make periodic payments or adjusts to one another. Swaps cover interest rate, equity, commodity and currency products. They can be simple floating for fixed exchanges or complex hybrid products with multiple option features. Swaps are not exclusively OTC transactions because listed instruments are often include in the risk management of the position. Often managers evaluate the relative merits of conducting a swap (OTC) or a hedge predicated on listed instruments. The interaction between these two markets promotes greater financial efficiencies.
| ||Trade date: The date on which a transaction is initiated. The settlement date (the day cash and the asset officially changes ownership) may be the trade date or a later date.The date on which a security trade occurs.In an interest rate swap, the date that the Counterparties commit to the swap. Also, the date on which a trade occurs. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 3 business days after the trade.Is the date of the transaction.|
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