What is interest rate swap?

猪猪的宝贝

The definition on Wikipedia is:
A swap is a derivative in which one party exchanges a stream of interest payments for another party's stream of cash flows. Interest rate swaps can be used by hedgers to manage their fixed or floating assets and liabilities. They can also be used by speculators to replicate unfunded bond exposures to profit from changes in interest rates. Interest rate swaps are very popular and highly liquid instruments.



But I still dont quite understand. anyway can explain with example?

I've got lots of points...

七月

简单说来，就是两方各自利用自己在不同capital market的相对优势，互相交换loan来达到双方的benefit。比如一方在fixed rate市场有优势，另一方在floating rate市场有优势，通过两方交换，各自都可以达成用比自己原来可借到的利率更优惠的利率来finance

bigwood

在同样一个Instrument下，譬如说美元债卷 (Bill, Bond)
甲方和乙方签订一系列合同，这一系列合同可以按每季度或者每半年，每一年到期，这个合同上有一个利息，是Fix Interest  ( X )

甲方将会在每次合同到期的时候，付给乙方 Fix Interest ( X )
而乙方会在每次合同到期的时候，按市场的浮动利率 Floating Interest 付给甲方 ( S )

一般这样的合同在settle的时候，只支付差额

对甲方来说，如果收入S 大于 支出X， S-X >0, 由甲方收钱，乙方付钱给甲方
对甲方来说，如果收入S 小于 支出X， S-X <0, 由乙方收钱，甲方付钱给乙方

说白了就是赌每次合同到期时，市场利率是大于合同上的利率还是小于合同上的利率。

一般商业银行进入这样的合同用来规避定期和活期利率的风险。

[ 本帖最后由 bigwood 于 2010-7-29 15:22 编辑 ]

猪猪的宝贝

Thanks very much for the explanation! it helps a lot!

I wonder if you guys have any knowledge around "Hedge accounting/hedge transactions"?

It would be very much appreciated if you could explain the "hedge" a bit as well...

I have more "fen fen" available....

七月

对，不交换本金只交换利息差额。

Happybanana

Its hard to explain hedge accounting in short words.

Basic concepts - the purpose is the management the cash flow or value changes, mitigate the risks associated....

Requirements - you need to have:

1. hedged item (what the company is hedging against)  & hedging instruments (normally derivatives, interest rate swap is one of those)

2. hedging documentation (as required by AASB139)

3. Effectiveness test (as specified by AASB139) - the effective range is specified in your CLP

4. then if the  transactions meet the criteria as said above, you can apply hedge accounting. There are three types of hedges:

- fair value hedge (manage value changes0

- cash flow hedge (manage cash flow)

- hedge the investment in foreign operations (eg. a company's investment  in its overseas subsidiaries)

Detailed journal entries can be found in your CLP.

Again, its very difficult to explain all relevant details here. Hope it helps

猪猪的宝贝

感谢快乐香蕉。。。
您好厉害阿，过了这么久居然还是记的这么清楚，而且连standard都记得。。。。

你说的几点我在CLP里都有看到，只是看完了还是觉得概念模糊。也说不清楚哪里模糊，所以也问不出来特别具体的问题。

可能我现在主要的问题之一是：在什么情况下要apply保值会计？也就是hedgeaccounting。。。（中文名字我是google来的）


PS:我到现在unit2了还没有作critical file。主要是不知道如何做。我有听说很多人根本也没有准备critical file还是一样考试。。

Happybanana

Apply Hedge Accounting when:

1. the company designate the transaction at inception
2. the company has hedging documentation (evidence of designation, identification of hedged item and hedging instrument)
3. the company has performed the effectiveness testing & the hedge is effective

Meet above 3 criteria, then you can apply hedge accounting.

I have been dragged to train our CA candidates, so can't really forget it. The sad thing for me is that after these many years it's challenging to forget all accounting standards...

kaixin123

好棒，希望将来可以做个像你这样与时俱进的会计，呵呵。。
猪猪这个问题提得好，我也很困惑，就是没好意思问，还在啃书阶段

静好如初

简言之，金融衍生工具SWAP的一种，用来HEDGE INTEREST RISK，通常和LIBOR挂钩。

Explorer

Interest swap is also related to appetite on risk exposure.
Risk-averser prefer fixed rate.
Risk-seeker prefer flexible rate.

猪猪的宝贝

谢谢大家，都白条！

巴萨的兄弟，难道你也是同行？

Explorer

嘿嘿，不是只有会计才学这个的。
不过曾经是同行

kaixin123

难道楼上的是CFA？
这里牛人真多~~

Devil_Star

原帖由 jilltwain 于 2010-7-29 16:50 发表
简言之，金融衍生工具SWAP的一种，用来HEDGE INTEREST RISK，通常和LIBOR挂钩。

本土的不是用BBSW吗？

猪猪的宝贝

In fact, I need some clarification on BBSW too!

It appears to be in many questions but I am not sure what it is and when i should use it.

carlhuang

BBSW,LIBOR,HIBOR都是各个国家金融市场发布的利率，BBSW是澳洲的，LIBOR伦敦，HIBOR是香港市场的利率，BBSW就是Reuters上的一个code,输入BBSW就可以查询到当日的利率了。

carlhuang

做IRS的交易，就是为了把利率风险对冲掉，比如你有一笔债务需要支付基于Libor的floating interest rate,这个时候只要同时做一笔pay fixed rate, receive floating rate的interest rate swap, 你就把原来的利率上涨的风险hedge掉了

xujie

lz  在读cpa  financial reporting ?

[ 本帖最后由 xujie 于 2010-8-19 15:56 编辑 ]

猪猪的宝贝

no CA.

qqyang

CA Fin这一章不会考太难，死扣WE和activity就能拿分。

猪猪的宝贝

what's WE?

are you saying if I can do all the activites in CLP I can definitely pass?

I am not studing the consolidation unit, sooooooo hard! gosh i hate consolidation!

benkk06

WE=worked example

猪猪的宝贝

thanks.

but he is saying for Financial Instrument it would be too harsh on exams. but what about other units?
by doing WE and Activities, does it gurantee a pass on exams?

benkk06

Apart from tax and death, nothing can be guaranteed.
But these two things will definitely help

carlhuang

Interest Rate Swap is all about Treasury and Risk Management.