Derivatives

Liability-Based Swap

October 6, 2021
Banking

Amortizing Loan

October 6, 2021

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A currency swap whereby a rate observed in one currency is applied to a principal amount denominated in another currency. For example, a 3-month LIBOR observed in the United States is exchanged for a 3-month LIBOR in Britain, with both rates being applied to a principal of 20 million British pounds.

The differential swap is also known as diff swap, quanto swap, and rate differential swap.

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