Interest Rate Swaps
An agreement between two parties to exchange fixed to floating rate payment or vice versa in the same currency for a predetermined period and at a predetermined intervals on a notional principal amount. No exchange of principal is involved only interest payments are exchanged.
Structured Interest Rate derivative solutions
A tailor-made derivative product to help customers hedge their interest rate requirements.
Cap
An interest rate cap is an arrangement whereby, in return for a premium, the seller (writer) of the cap undertakes over an agreed period to compensate the buyer of the cap whenever a reference interest rate (e.g. LIBOR) exceeds the pre-agreed maximum interest rate (cap rate).
Floor
An interest rate floor is an arrangement whereby, in return for a premium, the seller (writer) of the floor undertakes over an agreed period to compensate the buyer of the floor whenever a reference interest rate (e.g. LIBOR) falls below the pre-agreed minimum interest rate (floor rate).
Collar
Is a combination of a cap and a floor of identical specifications except for the strike price. A borrower can buy a cap and simultaneously sell a floor to reduce the cost of the hedge.
