Interest rate swap

 

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Interest rate swap

An arrangement in which two parties agree to exchange periodic interest payments, at agreed intervals, over an agreed period, but without any principal being paid. The most common and simplest deal involves one party paying a fixed rate of interest and the other paying a floating rate. IRSs are used for hedging, speculation or arbitrage.



Similar Matches

Interest

Interest

The price paid for borrowing money. It is expressed as a percentage rate over a period of time and reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property.


Interest payable

Interest payable

An accounting term which refers to the amount a company pays in the form of interest on cash borrowings. The figure for interest payable can be found in the balance sheet. Its flip side is 'interest receivable' - the amount a company receives as interest on its cash deposits.


Interest only strip (IO)

Interest only strip (IO)

A security based solely on the interest payments from a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop, and the value of the IO falls to zero.


Exact interest

Exact interest

Interest paid based on the basis of a 365-day/year schedule by a bank or other financial institution as opposed to a 360-day basis (ordinary interest). Difference can be material when large principal sums of money are involved.


Covered interest rate

Covered interest rate

The covered interest rate, in a currency other than your own, is the nominal interest rate plus the forward premium on the currency; thus the percent you will earn holding the foreign asset while protecting against exchange-rate change by selling the foreign currency forward.


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