Double rate corridor swap means a transaction which combines an interest rate swap and two binary interest rate options (digi cap and digi floor) sold by the client to the bank.

This swap constitutes a zero cost option strategy which decreases the fixed rate of the interest rate swap by the premium paid by the bank for the binary interest rate options bought. At the same time, the structure provides a 100% hedging of the client’s maximum interest expenses since the payout of the two binary interest rate options (in % p. a.) is determined at the time of deal closing. Notional amounts of the two options and the swap are identical.

Product features

Lower fixed rate compared to the interest rate swap.

Zero-cost strategy.

Hedges maximum interest expenses.

Increase in interest expenses if the binary interest rate options are used by the bank.