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Basket Rate


A rate that results from averaging, in a way or another, the rates of portfolio components. A basket rate can be used as the reference rate on a swap.

For example, if a portfolio consists of three assets, the rates on them is: 5%, 7%, and 8%. Therefore, the basket rate, using simple average, is (5% + 7% + 8%)/ 3= 6.66%.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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