A swap which partially matches the debt it was picked to alter its underlying interest rate (whether from fixed to floating or vice versa). A matching swap may differ from the debt in terms of tenor or notional principal amount. Using swaps of different notional amount to alter the fixe/floating mix in a portfolio may result in a loan that is not fully swapped from fixed to floating (a portion of it remains fixed) or from floating to fixed (a part of it remains floating). Similarly, the difference in tenors may arise from a steep swap yield curve, whereas a counterparty may choose to fix a shorter maturity than that of the debt.
December 21, 2024
