Interest rate swaps

Interest rate swaps

An interest rate swap exchanges one set of cashflows for another. The simplest example is a borrower who has borrowed on a floating rate basis but who wishes to fix their interest rate costs. In this example the borrower will enter a pay fixed swap which means they will pay an agreed fixed amount on a regular (monthly/quarterly/semi-annual) basis and in exchange receive a floating rate amount. The received floating amount will offset against the paid floating amount on the underlying debt. The net effect is the borrower paying fixed.

There are many uses for interest rate swaps with the above example the simplest and most common for Hedgebook users.

How Hedgebook helps:

Hedgebook is designed to capture, value and report interest rate swaps, including amortising structures. The daily rate feed of floating rate references such as BKBM and BBSW simplifies the valuing, administration, control and compliance of these financial instruments.