Swap rate
 | This article needs additional citations for verification. (October 2009) |
Swap rates are the borrowing rates between financial institutions, usually with credit ratings of A/AA equivalent. Swap rates are calculated using the fixed rate leg of interest rate swaps. Swap rates form the basis of the swap curve (also known as the par curve or LIBOR curve). In most emerging markets with underdeveloped government bond markets, the swap curve is more complete than the treasury yield curve, and is thus used as the benchmark curve.[1]
References
- ^ Mathieson, Donald J; Schinasi, Garry J. International capital markets: developments, prospects, and key policy issues. International Monetary Fund. ISBN 1557759499.
 | This finance-related article is a stub. You can help Wikipedia by expanding it. |
� The nature of swap rates � LIBOR is the interest rate at which AA-rated banks borrow for periods between 1 and 12 months from other banks � The swap rate is the fixed rate that the market is willing to exchange for a series of LIBOR payments/receipts � The 5-year swap rate can be earned by the following mechanism � Lend the principal for the first 6 months to a AA borrower and then relend it for successive 6 month periods to other AA borrowers � Enter into a swap to exchange the LIBOR income for the 5- year swap rate Interest