Interest rate swap

For whom it is intended:

• Particularly for legal entities

Definition: 

An interest rate swap is a transaction wherein one party pays (once or periodically) floating amounts in a specified currency calculated using an established floating interest rate from a notional amount in such currency and a second party pays (once or periodically) fixed amounts in the same currency calculated using a fixed interest rate in relation to the same notional amount.

This product serves to hedge interest rates for the long term. Only interest payments are exchanged, not the notional amounts.

Advantages of the product:

• In case of a floating loan interest rate, it enables hedging against an expected rise in interest rates.
• No costs connected with concluding a transaction
• Flexibility of parameters – can easily be adjusted to the structure of the underlying instrument (loan)
• Can be sold at any time

Variations of the product:

• Amortised interest rate swap – The notional amount of the swap decreases over time in a pre-defined manner.
• Step-up swap – The notional amount of the swap increases over time in a pre-defined manner.
• Roller coaster swap – The notional amount of the swap increases and decreases over time in a pre-defined manner.
• Combinations with interest rate or binary interest rate options that are tailor-made according to current market conditions.

Conditions of concluding a transaction:

• Master Agreement for Financial Transactions
• Limit for treasury operations
• Minimum volume of EUR 300,000

For more information, please contact your bank advisor.