Double rate corridor swap

For whom it is intended:

• Particularly for legal entities 
  

Definition:

This refers to a transaction that combines an interest rate swap and two binary interest rate options (binary cap and binary floor), which the client sells to the bank. From the client’s perspective, this relates to a zero cost option strategy that effectively reduces the fixed rate of an interest rate swap by the option premium paid by the bank from the purchased binary interest rate options. At the same time, the structure completely locks in the client’s maximum interest costs, as the payout of both binary interest rate options (expressed in % p.a.) is established already upon conclusion of the transaction.

The notional amounts of the two options and the swap are the same.

Advantages of the product:

• Lower fixed interest rate as compared to an interest rate swap
• Zero cost strategy
• Locks in the maximum interest costs

Disadvantages of the product:

• Increase in interest costs in the case that the bank exercises its binary interest rate options
  

Conditions of concluding a transaction:

• Master Agreement for Financial Transactions
• Limit for treasury operations
• Minimum volume of EUR 1,000,000

For more information, please contact your bank advisor.