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As OTC instruments, interest rate swaps (IRSs) can be customised in a number of ways and can be structured to meet the specific needs of the counterparties. For example: payment dates could be irregular, the notional of the swap could be amortized over time, reset dates (or fixing dates) of the floating rate could be irregular, mandatory break clauses may be inserted into the contract, etc.
For example, consider a plain vanilla fixed-to-floating interest rate swap where Party A pays a fixed rate, and Party B pays a floating rate. In such an agreement the fixed rate would be such that the present value of future fixed rate payments by Party A are equal to the present value of the expected future floating rate payments (i.e. the NPV ...
Quality spread differential (QSD) arises during an interest rate swap in which two parties of different levels of creditworthiness experience different levels of interest rates of debt obligations. A positive QSD means that a swap is in the interest of both parties. A QSD is the difference between the default-risk premium differential on the ...
In recent years, interest rate swaps have become an important component of the fixed-income market. With an interest rate swap, investors will typically exchange or swap a fixed-interest payment ...
In finance, a currency swap (more typically termed a cross-currency swap, XCS) is an interest rate derivative (IRD). In particular it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. It has pricing associations with interest rate swaps (IRSs), foreign exchange (FX) rates, and FX swaps ...
The floating leg of a constant maturity swap fixes against a point on the swap curve on a periodic basis. A constant maturity swap is an interest rate swap where the interest rate on one leg is reset periodically, but with reference to a market swap rate rather than LIBOR. The other leg of the swap is generally LIBOR, but may be a fixed rate or ...
Typical interest rates on home equity loans are lower than those of the average credit card and personal loan, and tapping into your home's value to pay off high-interest debt could significantly ...
For example, opening a 12-month CD that earns 4.50% today means you'll continue earning 4.50% over the entire 12 months, even as HYSA interest rates drop. That's a guaranteed return of about $450 ...