What is an Interest Rate Swap?

Interest rate swaps Interest rate swaps are interest rate swaps that change the structure of creditor's rights or debts by changing the way interest is paid. After the two parties sign the contract, they exchange interest payment methods in accordance with the contract, such as Floating interest rates are exchanged for fixed rates, or one type of floating interest rate is exchanged for another. The parties do not exchange the principal, the principal is only used as the basis for calculation.

Interest rate swap

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Interest rate swaps Interest rate swaps are interest rate swaps that change the structure of creditor's rights or debts by changing the way interest is paid. After the two parties sign the contract, they exchange interest payment methods in accordance with the contract, such as

(A) circumvention

A foreign trade company had a five-year, US dollar liability with floating interest rates on April 1 with a principal of USD 10 million and an interest rate of LIBOR + 1% announced by the international market on the interest calculation date, paying interest every six months. April The 1-day borrowing rate is 3.33%. The company predicts that the US dollar interest rate has bottomed out and there is a risk of rising interest rates in the future. In order to avoid this risk, it is to carry out interest rate swap transactions with Minsheng Bank. The bank pays the company a floating interest rate of LIBOR + 1%. , Completely in line with the customer's original loan interest rate conditions, so that the company pays the interest on the debts payable, and the company pays the bank a fixed interest rate of 6.6%, so that the company can avoid the risk of rising interest rates