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1、Chapter 9Interest Rate Derivatives and Swaps 第一页，共十四页。INTEREST RATE AND CURRENCY SWAPSI. INTEREST RATE AND CURRENCY SWAPSA. INTEREST RATE SWAPS1. Definitionan agreement between 2 parties toexchange US$ interest payments for a specific maturity on an agreed notional amount.第二页，共十四页。HOW THE CLASSIC SW
2、AP WORKS a. Notional principal: a reference amount used only to calculate interest expense but never repaid.b. Maturities: less than 1 to over 15 years第三页，共十四页。THE CLASSIC SWAP2. Typesa. Coupon swapb. Basis swap3. LIBOR: the most important reference rate in a swap4. Swap Usage:To reduce risk potenti
3、al and costs.第四页，共十四页。THE CURRENCY SWAPB.Currency Swaps1. Definitiontwo parties exchange foreign currency-denominated debt at periodic intervals.2. Purpose: similar to parallel loan第五页，共十四页。THE CURRENCY SWAP3.Differences of a Currency Swap:a. Currency swap is not a loanb. No interest expense; no bal
4、ance sheet entryc. The right to offset any non-payment is more firmly established第六页，共十四页。THE CURRENCY SWAP4. Similarities between Interest Rate andCurrency Swapsa. Avoid exchange rate riskb. Exchange rate is only a reference todetermine amounts exchanged5. Economic Benefits of Swapswhen arbitrage p
5、rohibited, they providelong-term financing.第七页，共十四页。II. INTEREST RATE FORWARDS AND FUTURESForward and futures contracts: - three types used to manage interest rate riskA.Forward forwardsB.Forward rate agreementsC.Eurodollar futures第八页，共十四页。INTEREST RATE FORWARDS AND FUTURESForward forwards1.a contra
6、ct that fixes an interest rate today on a future loan or deposit.2.Contract conditions:- specific interest rate - principal amount of future loan - start and ending dates of future interest rate period第九页，共十四页。INTEREST RATE FORWARDS AND FUTURESForward rate agreements (FRAs)1. cash-settled2. over-the
7、-counter forward contract 3. company fixes an interest rate applied to a specified future interest period on a notional amount.第十页，共十四页。INTEREST RATE FORWARDS AND FUTURESEurodollar Futures1.A cash-settled futures contract for a 3-month eurodollar deposit paying LIBOR2.Contracts traded on: a. Chicago
8、 Mercantile Exchange b. London International Financial Futures Exchange c. Singapore International Monetary Exchange第十一页，共十四页。III.STRUCTURED NOTESInterest-bearing securities whose interest payments are determined by reference to a formula set in advance and adjusted on specific reset dates.第十二页，共十四页。STRUCTURED NOTESInverse Floatersa floating-rate instrument whose interest rate moves inversely with market interest rates.第十三页，共十四页。内容(nirng)总结Chapter 9。B. Forward rate agreements。1. cash-settled。2. Contracts traded on:。a.Chicago Mercantile Exchange。Inverse Floaters第十四页，共十四页。