Interest rate & currency swaps: the markets, products and applications
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Chicago, Ill. u.a.
Probus Publ.
1994
|
| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | XVII, 232 S. graph. Darst. |
| ISBN: | 1557384681 |
Staff View
MARC
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| 245 | 1 | 0 | |a Interest rate & currency swaps |b the markets, products and applications |c Ravi E. Dattatreya ; Raj E. S. Venkatesh ; Vijaya E. Venkatesh |
| 264 | 1 | |a Chicago, Ill. u.a. |b Probus Publ. |c 1994 | |
| 300 | |a XVII, 232 S. |b graph. Darst. | ||
| 336 | |b txt |2 rdacontent | ||
| 337 | |b n |2 rdamedia | ||
| 338 | |b nc |2 rdacarrier | ||
| 650 | 4 | |a Foreign exchange futures |z United States | |
| 650 | 4 | |a Hedging (Finance) |z United States | |
| 650 | 4 | |a Interest rate futures |z United States | |
| 650 | 4 | |a Swaps (Finance) |z United States | |
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| 700 | 1 | |a Venkatesh, Vijaya E. |e Verfasser |4 aut | |
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Record in the Search Index
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|---|---|
| adam_text | Table of Contents
List of Exhibits and Tables ix
Preface xv
Acknowledgments xvii
1
Introduction to Interest Rate Swaps 1
The World Bank/ IBM Currency Swap 5
Evolution of the Swap Market 6
A Simple Interest Rate Swap Transaction 11
Review of the Simple Swap Transaction 15
Terminology 16
A Road Map 18
2
Applications and Structures 19
Examples of Swap Applications 19
Swap Structures 29
The Standard Interest Rate Swap 30
Off Market Swap 31
Zero Coupon Swap 34
Swap in Arrears 35
Basis Swap 35
Asset Swap—Synthetic Securities 37
Forward Swap 39
Variable Fixed Rate Swaps 41
Swaps with Variable Notional Amount 42
Summary 46
v
vi Table of Contents
3
Currency Swaps 47
A Simple Currency Swap Transaction 48
Review of the Simple Swap Transaction 51
Structural Variations 52
Standard Currency Swap 52
Coupon Only Swap 54
Off Market Swap 55
Zero Coupon Swap 57
Basis Swap 58
The Asset Swap—Synthetic Securities 59
Forward Swap 60
Swaps with Variable Notional Amount 62
Summary 65
4
An Approach to Hedging 67
Hedging in an Asset/Liability Context 67
Measures of Interest Rate Risk 70
Simple Hedging Concepts 75
Hedging Cost 78
Yield Curve Risk 81
Hedging Yield Curve Risk—
The Risk Point Method 87
Extensions 91
Simulation 92
Exchange Rate Risk—Multicurrency Hedging 92
Duality in Hedging 93
Even an Efficient Market Is Inefficient 96
Hedge Timing 99
Diversification 102
Hidden Factors 104
Hedging, Arbitrage, and Speculation 106
ALM for Industrial Corporations 109
Implementation 118
Table of Contents vii
5
Analyzing a Transaction 123
Evaluating a Transaction 123
Historical Analysis 127
Breakeven Analysis 130
Scenario Analysis 132
Monte Carlo Simulation 134
6
Pricing and Risk Characteristics 141
Participants in the Swap Market 141
Swap Pricing Basics 142
Forward Rates 153
Interest Rate Risk Characteristics 164
Pricing an International Money Market
(IMM) Swap 167
Pricing a Short Dated Swap 176
Pricing a Generic Swap—Bootstrapping 183
Pricing a Swap Termination 194
Pricing a Currency Swap 195
Swap Spreads 208
Types of Risks in Swaps 215
Credit Risk in Swaps 217
The BIS Current Exposure Method 219
The BIS Original Exposure Method 221
The Option Approach 222
About the Authors 231
List of Exhibits and Tables
EXHIBIT 1 1 Growth of the Interest Rate
Swap Market 2
EXHIBIT 1 1B Growth of the Cross Currency
Swap Market 2
EXHIBIT 1 2 The Size of the Swap Derivatives
Market: Swaps in the World s Financial
Market 3
EXHIBIT 1 3 Parallel Loans: Interest Rate and
Currency Swaps 8
EXHIBIT 1 4 Exchanging Interest Payments 9
EXHIBIT 1 5 Interposing a Swap Dealer 10
EXHIBIT 1 6 The Floating Asset/Fixed Liability
Gap 12
EXHIBIT 1 7 A Simple Swap Transaction to Bridge
the Asset/Liability Gap 14
TABLE 1 1 Cash Flow Table for a Swap 14
EXHIBIT 1 8 Cash Flow Profile of Swap:
Annual Fixed Rate Receipts 15
EXHIBIT 2 1 Using a Swap to Exploit Comparative
Advantage 21
EXHIBIT 2 2 Using a Swap to Reduce Fixed Rate 23
EXHIBIT 2 3 Obtaining Fixed Rate Funding 24
EXHIBIT 2^ Reducing Floating Rate Cost 24
ix
x List of Exhibits and Tables
EXHIBIT 2 5 Guaranteeing Liquidity via Bond
Issue 25
EXHIBIT 2 6 Converting to Floating Rate 26
EXHIBIT 2 7 Locking in a Low Fixed Rate 26
EXHIBIT 2 8 Obtaining Desired Structure 27
EXHIBIT 2 9 Achieving Funding Cost Target 31
EXHIBIT 2 10 Hedging an Ex Warrant Bond 32
EXHIBIT 2 11 Reversing an Existing Interest
Rate Swap 33
EXHIBIT 2 12 Creating a Zero Coupon Liability 34
EXHIBIT 2 13 Asset Liability Matching 36
EXHIBIT 2 14 Spread Between CP and LIBOR
(Monthly, in Basis Points) 37
EXHIBIT 2 15 Creating a Fixed Rate Asset 37
EXHIBIT 2 16 Hedging a Fixed Rate Asset 38
EXHIBIT 2 17 Hedging Future Bond Issue with
a Forward Swap 40
EXHIBIT 2 18 Cash Flow Management with
Step Up Coupon Swap 42
EXHIBIT 2 19 Hedging with an Accreting Swap 44
EXHIBIT 3 1 The Yen Asset/Dollar Liability Gap 48
EXHIBIT 3 2 A Simple Currency Swap Transaction
to Bridge the Asset/Liability Gap 50
EXHIBIT 3 3 Cash Flow Profile of Swap 50
EXHIBIT 3 4 Cash Flow Table for a Currency Swap 51
EXHIBIT 3 5 Funding below Cost Target 53
List of Exhibits and Tables xi
EXHIBIT 3 6 Hedging a Dual Currency Bond 55
EXHIBIT 3 7 Hedging a Convertible Bond 56
EXHIBIT 3 8 Conserving Cash with a Zero
Coupon Liability 57
EXHIBIT 3 9 Reducing Basis Risk 59
EXHIBIT 3 10 Creating a Synthetic U.S. Dollar Asset 60
EXHIBIT 3 11 Creating a Synthetic U.S. Dollar
Liability 63
TABLE 4 1 Computing the Duration of a 5 Year
4% Bond Priced at Par 72
EXHIBIT 4 1 The Double Swap 103
EXHIBIT 4 2 Fair Market Line 108
EXHIBIT 4 3 Financing a Real Asset 111
EXHIBIT 4 4 Creating an Inverse Floater Liability 114
EXHIBIT 4 5 Creating a Super Floater Liability 117
EXHIBIT 4 6 Using a Place Holder Swap in
the Tactical Portfolio 121
EXHIBIT 5 1 Historical U.S. Year Interest Rate
Swap Spread 128
EXHIBIT 5 2 Historical U.S. Year Treasury
Yields 129
EXHIBIT 5 3 Scatter Diagram of Treasury Yields
versus Swap Spreads, with Linear
Regression Fit 129
EXHIBIT 5 4 Breakeven Analysis: Converting
to Floating Rate 130
TABLE 5 1 Breakeven Analysis 132
xii List of Exhibits and Tables
TABLE 5 2 Scenario Analysis 134
EXHIBIT 5 5 Simulated Path of Three Month
LIBOR 139
EXHIBIT 6 1 Summary of Interest Rate Swap
Pricing Procedure 151
EXHIBIT 6 2 Upward Sloping Par Curve 157
EXHIBIT 6 3 Downward Sloping Par Curve 158
EXHIBIT 6 4 Humped Par Curve 159
EXHIBIT 6 5 Forward Rate as a Predictor of
Actual Rates—6M T Bill Rate 161
EXHIBIT 6 6 Forward Rate as a Predictor of
Actual Rates—3M LIBOR Rate
(1991 1993) 163
TABLE 6 1 The IMM Swap—Swap Parameters 168
TABLE 6 2 The IMM Swap—Market Data 170
TABLE 6 3 The IMM Swap—Cash Flows and
Pricing of the Swap 173
TABLE 6 4 The IMM Swap—Formulas 175
TABLE 6 5 The IMM Swap—Risk Points and
Hedge Ratio 176
TABLE 6 6 The Short Dated Swap
Swap Parameters 178
TABLE 6 7 The Short Dated Swap—Computing
the IMM Zero Rates 179
TABLE 6 8 The Short Dated Swap—Computing
the Interpolated Rates 181
TABLE 6 9 The Short Dated Swap—Cash Flows
and Pricing of the Swap 182
List of Exhibits and Tables xiii
TABLE 6 10 The Short Dated Swap—Risk Points
and Hedge Ratio 184
TABLE 6 11 The Short Dated Swap—Formulas 185
TABLE 6 12 The Generic Swap—Swap Parameters 186
TABLE 6 13 The Generic Swap—Bootstrapping 187
TABLE 6 14 The Generic Swap—Cash Flows and
Pricing of the On Market Version 190
TABLE 6 15 The Generic Swap—Risk Points and
Hedge Ratio of the On Market Version 192
TABLE 6 16 The Generic Swap—Formulas 193
EXHIBIT 6 17 The Generic Swap—Cash Flows and
Pricing of the Off Market Version 196
TABLE 6 18 The Generic Swap—Risk Points and
Hedge Ratio for the Off Market
Version 197
TABLE 6 19 The Cross Currency Swap
Swap Parameters 198
TABLE 6 20 The Cross Currency Swap
Computing the IMM Zero Rates 200
TABLE 6 21 The Cross Currency Swap
Computing the Interpolated Rates 201
TABLE 6 22 The Cross Currency Swap
Cash Flows and Pricing of the
USD Leg 202
EXHIBIT 6 7 A Typical Cross Currency Swap 203
TABLE 6 23 The Cross Currency Swap
Cash Flows and Pricing of the
DEM Leg 204
xiv List of Exhibits and Tables
TABLE 6 24 The Cross Currency Swap—
Risk Profile for USD Leg 206
TABLE 6 25 The Cross Currency Swap
Risk Profile for DEM Leg 207
TABLE 6 26 The Cross Currency Swap—Effects
of Changes in the Swap and
Exchange Rates 208
TABLE 6 27 The Cross Currency Swap
USD Leg of the Coupon Only Swap 209
TABLE 6 28 The Cross Currency Swap—
DEM Leg of the Coupon Only Swap 210
TABLE 6 29 The Cross Currency Swap
Risk Profile for the USD Coupon
Only Swap 211
TABLE 6 30 The Cross Currency Swap
Risk Profile for the DEM Leg
of the Coupon Only Swap 212
EXHIBIT 6 8 Value of Standard Interest Rate
Swap—Various Scenarios 225
EXHIBIT 6 9 Statistical Summary of
Swap Exposure 226
EXHIBIT 6 10 AA s Exposure to BB 227
EXHIBIT 6 11 Statistical Summary of
Currency Swap Exposure 228
EXHIBIT 6 12 Statistical Summary—
AA s Exposure to BB 229
|
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| author | Dattatreya, Ravi E. Venkatesh, Raj E. Venkatesh, Vijaya E. |
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| geographic | USA |
| geographic_facet | USA |
| id | DE-604.BV009892277 |
| illustrated | Illustrated |
| indexdate | 2024-07-09T17:42:41Z |
| institution | BVB |
| isbn | 1557384681 |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-006549948 |
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| physical | XVII, 232 S. graph. Darst. |
| publishDate | 1994 |
| publishDateSearch | 1994 |
| publishDateSort | 1994 |
| publisher | Probus Publ. |
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| spelling | Dattatreya, Ravi E. Verfasser aut Interest rate & currency swaps the markets, products and applications Ravi E. Dattatreya ; Raj E. S. Venkatesh ; Vijaya E. Venkatesh Chicago, Ill. u.a. Probus Publ. 1994 XVII, 232 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Foreign exchange futures United States Hedging (Finance) United States Interest rate futures United States Swaps (Finance) United States Swap (DE-588)4199581-8 gnd rswk-swf USA Swap (DE-588)4199581-8 s DE-604 Venkatesh, Raj E. Verfasser aut Venkatesh, Vijaya E. Verfasser aut HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=006549948&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Dattatreya, Ravi E. Venkatesh, Raj E. Venkatesh, Vijaya E. Interest rate & currency swaps the markets, products and applications Foreign exchange futures United States Hedging (Finance) United States Interest rate futures United States Swaps (Finance) United States Swap (DE-588)4199581-8 gnd |
| subject_GND | (DE-588)4199581-8 |
| title | Interest rate & currency swaps the markets, products and applications |
| title_auth | Interest rate & currency swaps the markets, products and applications |
| title_exact_search | Interest rate & currency swaps the markets, products and applications |
| title_full | Interest rate & currency swaps the markets, products and applications Ravi E. Dattatreya ; Raj E. S. Venkatesh ; Vijaya E. Venkatesh |
| title_fullStr | Interest rate & currency swaps the markets, products and applications Ravi E. Dattatreya ; Raj E. S. Venkatesh ; Vijaya E. Venkatesh |
| title_full_unstemmed | Interest rate & currency swaps the markets, products and applications Ravi E. Dattatreya ; Raj E. S. Venkatesh ; Vijaya E. Venkatesh |
| title_short | Interest rate & currency swaps |
| title_sort | interest rate currency swaps the markets products and applications |
| title_sub | the markets, products and applications |
| topic | Foreign exchange futures United States Hedging (Finance) United States Interest rate futures United States Swaps (Finance) United States Swap (DE-588)4199581-8 gnd |
| topic_facet | Foreign exchange futures United States Hedging (Finance) United States Interest rate futures United States Swaps (Finance) United States Swap USA |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=006549948&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
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