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Derivatives Definitions
Interest Rate Swap
A swap in which the two counterparties agree to exchange interest rate flows. Typically, one party agrees to pay a fixed rate on a specified series of payment dates and the other party pays a floating rate that may be based on LIBOR (London Interbank Offered Rate) on those payment dates. Th
Derivative
A financial instrument, traded on or off an exchange, the price of which is directly dependent upon (i.e., “derived from”) the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or a
Absolute Rate
The fixed part of an interest-rate swap, given as a percentage rather than a premium or discount to a reference rate. Also known as an ‘absolute swap yield’.