国际金融第14章
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– Interest rate swaps was $349.2 trillion USD. – Currency swaps was $16.5 trillion USD.
The most popular currencies are:
– – – – – U.S. dollar Japanese yen Euro Swiss franc British pound sterling
14-6
Swap Market Quotations
Swap banks will tailor the terms of interest rate and currency swaps to customers’ needs. They also make a market in “plain vanilla” swaps and provide quotes for these. Since the swap banks are dealers for these swaps, there is a bid-ask spread.
Firm 5.10% Swap A LIBOR Bank
If Firm A borrows from their bank at 5.0% fixed and takes up the swap bank on their offer of 5.1—5.2, they can convert their fixed rate 5% debt into a floating rate debt at LIBOR – 0.10%.
14-5
ຫໍສະໝຸດ Baidu
The Swap Bank
Swap bank is a generic term to describe a financial institution that facilitates swaps between counterparties. 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. – As a dealer, the swap bank stands ready to accept either side of a currency swap and then later lay off the risk, or match it with a counterparty.
B’s all-in-cost = –LIBOR + LIBOR + 0.20% + 5.20% = 5.40%.
Bank Y
14-12
Example of an Interest Rate Swap
Firm 5.10% Swap A LIBOR Bank
5.20%
Firm B LIBOR
The swap bank makes 10 basis points on the deal. The swap bank’s all-in-cost = –LIBOR + LIBOR – 5.20% + 5.10% = –0.10%
Bank X
Bank Y
14-14
Using a Swap to Transform a Liability
Firm A has transformed a fixed rate liability into a floater.
– A is borrowing at LIBOR – .10% – A savings of 10 bp.
Firm B
€3.85%
$LIBOR
Swap Bank
€3.82%
$LIBOR
Firm A
While most swaps are quoted against “flat” dollar LIBOR, “off-market” swaps are available where one party pays LIBOR plus or minus some number.
£Sterling
Bid 5.21 5.14 Ask 5.22 5.18
Swiss franc
Bid 0.92 1.23 Ask 0.98 1.31
U.S. $
Bid 3.54 3.90 Ask 3.57 3.94
2.89 3.82–3.85 means1.50 5.13 5.17 the
1.58 4.11 swap bank will 4.13 3.09 pay fixed-rate euro payments at 3.82% 5.12 5.17 1.73 1.81 4.25 4.28 3.26 against receiving1.93 LIBOR or it will 5.11 5.16 4.37 4.39 euro 2.01 3.41 receive fixed-rate euro payments at 4.50 5.11 5.16 2.10 2.18 4.46 3.55 3.85% against paying euro LIBOR. 4.58 5.10 5.15 2.25 2.33 4.55 3.66 3.77 3.85 5.10 5.09 5.08 5.15 5.14 5.13 2.37 4.48 2.56 2.45 2.56 2.64 4.62 4.70 4.75 4.66 4.72 4.79
14-3
Definitions
In a swap, two counterparties agree to a contractual arrangement wherein they will exchange cash flows at periodic intervals. There are two types of interest rate swaps.
Bank X
A’s all-in-cost = 5.0% + LIBOR – 5.10% = LIBOR – 0.10%.
14-11
Example of an Interest Rate Swap
Swap Bank
5.20%
Firm B LIBOR
If Firm B borrows floating from their bank at LIBOR + 0.20% and takes up the swap bank on their offer of 5.1—5.2, they can convert their floating rate debt into a fixed rate debt at 5.40%.
chenxj@suibe.edu.cn 67703822
14-2
Chapter Outline
Types of Swaps Size of the Swap Market The Swap Bank Swap Market Quotations Interest Rate Swaps Currency Swaps Variations of Basic Interest Rate and Currency Swaps Risks of Interest Rate and Currency Swaps Is the Swap Market Efficient?
• This is often called a currency swap; fixed for fixed rate debt service in two (or more) currencies.
14-4
Size of the Swap Market
In 2009 the notational principal of:
14-7
Interest Rate Swap Quotations
The convention is to quote against U.S. dollar LIBOR.
Euro-€
Bid 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year 2.34 2.62 2.86 3.06 3.23 3.38 3.52 3.63 3.74 3.82 Ask 2.37 2.65
14-13
Example of an Interest Rate Swap
Firm 5.10% Swap A LIBOR Bank
5.20%
Firm B LIBOR
The notional size is $40 million. The tenor is for 3 years.
A earns $40,000 per year on the swap. B earns $40,000 per year on the swap. The swap bank earns $40,000 per year.
Bank 5.0% Firm 5.10% Swap A LIBOR Bank X
Firm B has transformed a floating rate liability into a fixed rate liability.
– B is borrowing at 5.40% – A savings of 10 bp.
Fixed
Floating LIBOR
A 5%
B 5.50% LIBOR + .20%
The swap bank quotes a three-year swap as 5.1—5.2 (against dollar LIBOR).
14-10
Example of an Interest Rate Swap
14-9
Example of an Interest Rate Swap
Consider Firms A and B; each firm wants to borrow $40 million for three years.
– Firm A wants to finance an interest-rate-sensitive asset and therefore wants to borrow at a floating rate. A has good credit and can borrow at LIBOR. – Firm B wants to finance an interest-rate-insensitive asset and thus wants to borrow at a fixed rate. B has less-than-perfect credit and can borrow fixed at 5.5%.
– Single currency interest rate swap
• “Plain vanilla” fixed-for-floating swaps are often just called interest rate swaps.
– Cross-currency interest rate swap
Interest Rate and Currency Swaps
Chapter Fourteen
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Xiaojing Chen
14-8
Swap Quotations
3.82–3.85 means the swap bank will pay fixed-rate euro payments at 3.82% against receiving dollar LIBOR or it will receive fixed-rate euro payments at 3.85% against paying dollar LIBOR.
The most popular currencies are:
– – – – – U.S. dollar Japanese yen Euro Swiss franc British pound sterling
14-6
Swap Market Quotations
Swap banks will tailor the terms of interest rate and currency swaps to customers’ needs. They also make a market in “plain vanilla” swaps and provide quotes for these. Since the swap banks are dealers for these swaps, there is a bid-ask spread.
Firm 5.10% Swap A LIBOR Bank
If Firm A borrows from their bank at 5.0% fixed and takes up the swap bank on their offer of 5.1—5.2, they can convert their fixed rate 5% debt into a floating rate debt at LIBOR – 0.10%.
14-5
ຫໍສະໝຸດ Baidu
The Swap Bank
Swap bank is a generic term to describe a financial institution that facilitates swaps between counterparties. 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. – As a dealer, the swap bank stands ready to accept either side of a currency swap and then later lay off the risk, or match it with a counterparty.
B’s all-in-cost = –LIBOR + LIBOR + 0.20% + 5.20% = 5.40%.
Bank Y
14-12
Example of an Interest Rate Swap
Firm 5.10% Swap A LIBOR Bank
5.20%
Firm B LIBOR
The swap bank makes 10 basis points on the deal. The swap bank’s all-in-cost = –LIBOR + LIBOR – 5.20% + 5.10% = –0.10%
Bank X
Bank Y
14-14
Using a Swap to Transform a Liability
Firm A has transformed a fixed rate liability into a floater.
– A is borrowing at LIBOR – .10% – A savings of 10 bp.
Firm B
€3.85%
$LIBOR
Swap Bank
€3.82%
$LIBOR
Firm A
While most swaps are quoted against “flat” dollar LIBOR, “off-market” swaps are available where one party pays LIBOR plus or minus some number.
£Sterling
Bid 5.21 5.14 Ask 5.22 5.18
Swiss franc
Bid 0.92 1.23 Ask 0.98 1.31
U.S. $
Bid 3.54 3.90 Ask 3.57 3.94
2.89 3.82–3.85 means1.50 5.13 5.17 the
1.58 4.11 swap bank will 4.13 3.09 pay fixed-rate euro payments at 3.82% 5.12 5.17 1.73 1.81 4.25 4.28 3.26 against receiving1.93 LIBOR or it will 5.11 5.16 4.37 4.39 euro 2.01 3.41 receive fixed-rate euro payments at 4.50 5.11 5.16 2.10 2.18 4.46 3.55 3.85% against paying euro LIBOR. 4.58 5.10 5.15 2.25 2.33 4.55 3.66 3.77 3.85 5.10 5.09 5.08 5.15 5.14 5.13 2.37 4.48 2.56 2.45 2.56 2.64 4.62 4.70 4.75 4.66 4.72 4.79
14-3
Definitions
In a swap, two counterparties agree to a contractual arrangement wherein they will exchange cash flows at periodic intervals. There are two types of interest rate swaps.
Bank X
A’s all-in-cost = 5.0% + LIBOR – 5.10% = LIBOR – 0.10%.
14-11
Example of an Interest Rate Swap
Swap Bank
5.20%
Firm B LIBOR
If Firm B borrows floating from their bank at LIBOR + 0.20% and takes up the swap bank on their offer of 5.1—5.2, they can convert their floating rate debt into a fixed rate debt at 5.40%.
chenxj@suibe.edu.cn 67703822
14-2
Chapter Outline
Types of Swaps Size of the Swap Market The Swap Bank Swap Market Quotations Interest Rate Swaps Currency Swaps Variations of Basic Interest Rate and Currency Swaps Risks of Interest Rate and Currency Swaps Is the Swap Market Efficient?
• This is often called a currency swap; fixed for fixed rate debt service in two (or more) currencies.
14-4
Size of the Swap Market
In 2009 the notational principal of:
14-7
Interest Rate Swap Quotations
The convention is to quote against U.S. dollar LIBOR.
Euro-€
Bid 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year 2.34 2.62 2.86 3.06 3.23 3.38 3.52 3.63 3.74 3.82 Ask 2.37 2.65
14-13
Example of an Interest Rate Swap
Firm 5.10% Swap A LIBOR Bank
5.20%
Firm B LIBOR
The notional size is $40 million. The tenor is for 3 years.
A earns $40,000 per year on the swap. B earns $40,000 per year on the swap. The swap bank earns $40,000 per year.
Bank 5.0% Firm 5.10% Swap A LIBOR Bank X
Firm B has transformed a floating rate liability into a fixed rate liability.
– B is borrowing at 5.40% – A savings of 10 bp.
Fixed
Floating LIBOR
A 5%
B 5.50% LIBOR + .20%
The swap bank quotes a three-year swap as 5.1—5.2 (against dollar LIBOR).
14-10
Example of an Interest Rate Swap
14-9
Example of an Interest Rate Swap
Consider Firms A and B; each firm wants to borrow $40 million for three years.
– Firm A wants to finance an interest-rate-sensitive asset and therefore wants to borrow at a floating rate. A has good credit and can borrow at LIBOR. – Firm B wants to finance an interest-rate-insensitive asset and thus wants to borrow at a fixed rate. B has less-than-perfect credit and can borrow fixed at 5.5%.
– Single currency interest rate swap
• “Plain vanilla” fixed-for-floating swaps are often just called interest rate swaps.
– Cross-currency interest rate swap
Interest Rate and Currency Swaps
Chapter Fourteen
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Xiaojing Chen
14-8
Swap Quotations
3.82–3.85 means the swap bank will pay fixed-rate euro payments at 3.82% against receiving dollar LIBOR or it will receive fixed-rate euro payments at 3.85% against paying dollar LIBOR.