Interest rate swap (interest rate swap)
The English-Chinese Dictionary of Securities Investment by the Commercial Press explains: interest rate swap. Also called: interest rate swap. Swap contract. Both parties to the contract agree to exchange interest payments on the basis of outstanding loan principal at a specific date in the future. The purpose of interest rate swap is to reduce the financing cost. If one party can get a preferential fixed interest rate loan, but wants to finance at a floating interest rate, while the other party can get a floating interest rate loan, but wants to finance at a fixed interest rate, both parties can obtain the desired financing form through swap transactions.
Interest rate swap and currency swap occupy a major position in swap transactions.
Interest rate swap refers to the exchange of fixed interest rate and floating interest rate between two funds with the same currency, the same debt amount (principal) and the same term. This kind of communication is mutual. If Party A changes the fixed interest rate into Party B's floating interest rate, and Party B changes the floating interest rate into Party A's fixed interest rate, it is called exchange. The purpose of swap is to reduce capital cost and interest rate risk. Both interest rate swap and currency swap were developed by 1982. They are a new financing technology suitable for bank credit and bond financing, and also a new financial skill to avoid risks, which has been widely adopted internationally.
Reason: Interest rate swap occurs because there are two preconditions:
(1) there is a difference in weight overweight.
(2) Have the opposite intention to raise funds.
4 Interest rate type: LIBOR (London Interbank Offered Rate). The LIBOR interest rate offered by the bank means that the bank gave the money to others.
The interest rate charged by a big bank when it provides enterprise funds, that is, this bank uses this interest rate to deposit funds in other big banks. Some big banks or other financial institutions offer LIBOR interest rates of 1 month, 3 months, 6 months and 1 year to many major currencies.
LIBID (London Interbank Offered Rate) LIBOR. Ask the bank to agree with other banks to deposit funds in their own banks with LIBID. At any given moment, the quotation given by the bank about LIBID and LIBOR will overflow slightly (LIBOR is slightly higher than LIBID).
The above two kinds of interest rates depend on the trading behavior of banks and constantly change to ensure the balance between supply and demand of funds. The London Interbank Offered Rate (LIBOR) and LIBID trading market are called the European European Monetary Market. This market is not controlled by any government.
Repurchase rate)-In a repurchase agreement, investors who hold securities uniformly sell the securities to the other party of the contract and buy them back at a slightly higher price in the future. The other party in the contract provides capital loans to investors. The loan interest rate is the difference between selling and repurchasing securities. This interest rate is called the repo rate.
Zero interest rate (zero interest rate for n years) refers to the rate of return of funds invested today after it has been maintained for n years. All interest and principal are paid to investors at the end of N. Before the maturity of N years, the investment will not pay any interest income. The zero interest rate after n years is sometimes called the spot interest rate for n years, or the zero interest rate for n years, or the zero interest rate for n years.
Forward interest rate is the interest rate in a certain period in the future, which is implied by the current zero interest rate.