Blogs

This is part 1 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In part 1, we discuss the history of interest rate swaps so as to better understand the vital importance of this investment vehicle.

One of our team was recently asked to give a simple overview of interest rate swaps and how they work. Below was the explanation we put together, using a comparison between an interest rate swap to a fixed-rate bank loan to illustrate the key characteristics.

We think it is a nice, concise and clear way to explain interest rate swaps so thought we would share it. Comments welcome.

Introducing floating legs For our example interest rate swap we will be using the following inputs: Notional: $1,000,000 USD Coupon Frequency: Semi-Annual Fixed Coupon Amount: 1.24% Floating Coupon Index: 6 month USD LIBOR Business Day…

In the wake of the Global Financial Crisis (GFC), Corporate Governance has become a key focus, not just for large organisations but for small to medium sized entities as well. Corporate Governance relates to the…

Now that we know the basic terminology and structure of a vanilla interest rate swap we can now look at constructing our fixed leg of our swap by first building our date schedule, then calculating the fixed coupon amounts.

This is the first in our interest rate swap tutorial; a series of articles that will go from the basics about interest rate swaps, to how to value them and how to build a zero…

Once a company with foreign exchange risks has decided to lift or reduce hedging percentages as part of their risk management strategy, value-enhancing market dealing tactics to get the hedging entered at more favourable exchange…

It always surprises me with treasury management how much changes and yet how much stays the same. Having been in the treasury game for almost 25 years the basics remain the same – it’s all…

Swap Curve In the final article in this series, we will continue to build out our discount factor curve using longer dated par swap rates. Par Swap rates are quoted rates that reflect the fixed coupon for…

Swap curve construction In the previous articles we described basic swap terminology, created coupon schedules and calculated fixed and floating coupon amounts. We also present valued our cashflows and calculated forward rates from our Zero Curve. A…

Why is it that we love our spreadsheets so much? They are labour intensive, they’re often very complex and we all know about the risk of errors, yet we continue to nurture and protect our…

IFRS, International Financial Reporting Standards, has a mission of increasing financial statement readability and disclosure requirements. Profit and loss reporting plus risk management strategies play essential roles in both IFRS 7 and IFRS 9 rules….