推荐下载-InterestRateSwaps国际财务管理,英文版 精品

McGraw-Hill/Irwin
10-5
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
An Example of an Interest Rate Swap
Consider this example of a “plain vanilla” interest rate swap.
10-7
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
An Example of an Interest Rate Swap
The borrowing opportunities of the two firms are shown in the following table:
McGraw-Hill/Irwin
10-1
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Chapter Outline (continued)
Swap Market Quotations Variations of Basic Currency and Interest Rate
As a dealer, the swap bank stands ready to accept either side of a currency swap, and then later lay off their risk, or match it with a counterparty.
Company
An Example of an Interest Rate Swap
Firm B is a BBB-rated U.S. company. It needs $10,000,000 to finance an investment with a fiveyear economic life.
Firm B is considering issuing 5-year fixed-rate Eurodollar bonds at 11.75 percent.
The swap bank can serve as either a broker or a dealer.
As a broker, the swap bank matches counterparties but does not assume any of the risks of the swap.
It would make more sense to for the bank to issue floating-rate notes at LIBOR to finance floating-rate Eurodollar loans.
McGraw-Hill/Irwin
10-6
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Swaps Risks of Interest Rate and Currency Swaps Swap Market Efficiency Concluding Points About Swaps
McGraw-Hill/Irwin
10-2
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Definitions
In a swap, two counterparties agree to a contractual arrangement wherein they agree to exchange cash flows at periodic intervals.
There are two types of interest rate swaps:
BANK A 10%
LIBOR QSD =
DIFFERENTIAL 1.75% .5% 1.25%
McGraw-Hill/Irwin
10-10
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
An Example of an Interest Rate Swap
Swap
Bank
10 ½%
LIBOR – ¼%
Company
B
COMPANY B
Fixed rate
11.75%
Floating rate LIBOR + .5%
BANK A 10%
LIBOR QSD =
DIFFERENTIAL 1.75% .5% 1.25%
McGraw-Hill/Irwin
10-11
Alternatively, firm B can raise the money by issuing 5year FRNs at LIBOR + ½ percent.
Firm B would prefer to borrow at a fixed rate.
McGraw-Hill/Irwin
U.S.$ (34%)
¥(23%)
DM (11%)
FF (10%)
£(6%)
McGraw-Hill/Irwin
10-4
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
The Swap Bank
A swap bank is a generic term to describe a financial institution that facilitates swaps between counterparties.
This is often called a currency swap; fixed for fixed rate debt service in two (or more) currencies.
McGraw-Hill/Irwin
10-3
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Size of the Swap Market
In 1995 the notational principal of:
interest rate swaps was $12,810,736,000,000.
Currency swaps $1,197,395,000,000
The most popular currencies are:
Single currency interest rate swap
“Plain vanilla” fixed-for-floating swaps are often just called interest rate swaps.
Cross-Currency interest rate swap
The swap bank makes this offer to company B: You pay us 10 ½ % per year on $10 million for 5 years and we will pay you LIBOR – ¼ % per year on $10 million for 5 years.
An Example of an Interest Rate Swap
Swap
10 3/8%
Bank
Bank
LIBOR – 1/8%
A
The swap bank makes this offer to Bank A: You pay LIBOR – 1/8 % per year on $10 million for 5 years and we will pay you 10 3/8% on $10 million for 5 years
COMPANY B BANK A DIFFERENTIAL
Fixed rate
11.75%
Floating rate LIBOR + .5%
10% LIBOR
QSD =
1.75% .5%
1.25%
McGraw-Hill/Irwin
10-8
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Chapter Ten
10 Currency & Interest
Rate Swaps
INTERNATIONAL
FINANCIAL
Chapter Objective:
MANAGEMENT
This chapter discusses currency and interest rate
swaps, which are relatively new instruments for
hedging long-term interest rate risk and foreign
exchange risk.
Second Edition
EUN / RESNICK
CFra Baidu bibliotekapter Outline
Types of Swaps Size of the Swap Market The Swap Bank Interest Rate Swaps Currency Swaps
An Example of an Interest Rate Swap
½ % of $10,000,000 =
$50,000. That’s quite a
cost savings per year for 5
years.
10 3/8%
Swap Bank
LIBOR – 1/8%
Bank
10%
A
Here’s what’s in it for Bank A: They can borrow externally at 10% fixed and have a net borrowing position of
-10 3/8 + 10 + (LIBOR – 1/8) =
LIBOR – ½ % which is ½ % better than they can borrow floating without a swap.
COMPANY B
Fixed rate
11.75%
Floating rate LIBOR + .5%
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
An Example of an Interest Rate Swap
Here’s what’s in it for B:
Swap Bank
½ % of $10,000,000 =
COMPANY B
Fixed rate
11.75%
Floating rate LIBOR + .5%
BANK A 10%
LIBOR QSD =
DIFFERENTIAL 1.75% .5% 1.25%
McGraw-Hill/Irwin
10-9
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights
Bank A is a AAA-rated international bank located in the U.K. who wishes to raise $10,000,000 to finance floating-rate Eurodollar loans.
Bank A is considering issuing 5-year fixed-rate Eurodollar bonds at 10 percent.
$50,000 that’s quite a cost
savings per year for 5
10 ½%
years.
They can borrow externally at LIBOR + ½ % LIBOR – ¼% and have a net borrowing position of
10½ + (LIBOR + ½ ) - (LIBOR - ¼ ) = 11.25%