Friday, September 25, 2009
Swaps
Interest rate swaps occur generally
in three scenarios. Exchanges of a fixed rate
for a floating rate, a floating rate for a
fixed rate, or a floating rate for a
floating rate.
The "Swaps market" has grown dramatically.
Today, Swaps involve exchanges other than
interest rates, such as mortgages, currencies,
and "cross-national" arrangements. Swaps may
involve cross-currency payments
(U.S. Dollars vs. Mexican Pesos) and
crossmarket payments,
e.g., U.S. short-term rates vs. U.K. short-term rates.
in three scenarios. Exchanges of a fixed rate
for a floating rate, a floating rate for a
fixed rate, or a floating rate for a
floating rate.
The "Swaps market" has grown dramatically.
Today, Swaps involve exchanges other than
interest rates, such as mortgages, currencies,
and "cross-national" arrangements. Swaps may
involve cross-currency payments
(U.S. Dollars vs. Mexican Pesos) and
crossmarket payments,
e.g., U.S. short-term rates vs. U.K. short-term rates.
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