Intro-Swaps_05

Intro-Swaps_05 - The Swaps Market By Dr Fernando Diz...

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The Swaps Market By Dr. Fernando Diz
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Learning outcomes Swaps, counterparties, notional principal Interest rate swaps Receive fixed, pay fixed Cash flow diagrams Net payments Currency swaps
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Swaps swap  is an financial agreement between  two parties, called  couterparties , to  exchange a set of cash flows  over a  period in the future .
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Swaps 1. The commodity and quantity on which  the exchanged cash flows are  calculated. 2. The exchange price or formula used to  calculate the cash flows exchanged. (swap rate) 3. The times when these exchanges will  take place.(tenor)
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Swaps Two basic kinds of swaps depending on  the underlying asset. Interest rate swaps  Currency swaps
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Interest rate swap In an interest rate swap one counterparty  agrees to  make  a set of  fixed interest rate  payments (pay-fixed or swap buyer)  in  exchange for  receiving  a set of  floating  rate payments  from the other  counterparty.
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Interest rate swap The other counterparty to the agreement 
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Intro-Swaps_05 - The Swaps Market By Dr Fernando Diz...

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