79. Interest Rate Derivatives: Interest Rate Agreements, Interest Rate Swaps, etc. Деривативы процентных ставок: соглашения по процентным ставкам, свопы процентных ставок, и т.П.

Interest-Rate Derivative is a financial instrument based on an underlying financial security whose value is affected by changes in interest rates. Interest-rate derivatives are hedges used by institutional investors such as banks to combat the changes in market interest rates. Individual investors are more likely to use interest-rate derivatives as a speculative tool - they hope to profit from their guesses about which direction market interest rates will move.

An interest rate future is a financial derivative (a futures contract) with an interest-bearing instrument as the underlying asset. Interest rate futures are used to hedge against the risk of that interest rates will move in an adverse direction, causing a cost to the company. Examples include Treasury-bill futures, Treasury-bond futures and Eurodollar futures. A short-term interest rate (STIR) future is a futures contract that derives its value from the interest rate at maturation. Common short-term interest rate futures are Eurodollar, Euribor, Euroyen,Short Sterling and Euroswiss, which are calculated on LIBOR at settlement, with the exception of Euribor which is based on Euribor. This value is calculated as 100 minus the interest rate.

Forward Rate Agreement (FRA) is an over-the-counter contract between parties that determines the rate of interest, or the currency exchange rate, to be paid or received on an obligation beginning at a future start date. The contract will determine the rates to be used along with the termination date and notional value. On this type of agreement, it is only the differential that is paid on the notional amount of the contract.

Options on interest rates to hedge interest rate risk: 1) a cap is a call option on interest rates, often with multiple exercise dates; 2) a floor is a put option on interest rates, often with multiple exercise dates; 3) a collar is a position taken simultaneously in a cap and a floor (usually buying a cap and selling a floor).

A basis swap is an interest rate swap which involves the exchange of two floating rate financial instruments. A basis swap functions as a floating-floating interest rate swap under which the floating rate payments are referenced to different bases.

A plain vanilla interest-rate swap is the most basic type of interest-rate derivative. Under such an arrangement, there are two parties. Party one receives a stream of interest payments based on a floating interest rate and pays a stream of interest payments based on a fixed rate. Party two receives a stream of fixed interest rate payments and pays a stream of floating interest rate payments. Both streams of interest payments are based on the same amount of notional principal. Through this exchange, or swap, of cash flows, the two parties hope to reduce uncertainty and the threat of loss from changes in market interest rates. Other types of interest-rate derivatives include eurostrips, swaptions and interest rate call options, to name just a few.

Cross-Currency Swap is an agreement between two parties to exchange interest payments and principal on loans denominated in two different currencies. In a cross currency swap, a loan's interest payments and principal in one currency would be exchanged for an equally valued loan and interest payments in a different currency. The reason companies use cross-currency swaps is to take advantage of comparative advantages. For example, if a U.S. company is looking to acquire some yen, and a Japanese company is looking to acquire U.S. dollars, these two companies could perform a swap. The Japanese company likely has better access to Japanese debt markets and could get more favorable terms on a yen loan than if the U.S. company went in directly to the Japanese debt market itself, and vice versa in the U.S. for the Japanese company.