Product description
The key principle of an interest rate swap is the exchange of interest rates between the parties for the period of swap duration. Essentially, it can be characterized as - with small variations - a stream of FRA transactions.
One of the repeating payments is linked to a floating rate (reference rate) set forth on the day of fixation and based on the IBOR market rate. In most situations, 3-6 month period is fixed, depending on the common practice with respect to the relevant currency and the duration of the swap. The counter-payment is derived from a fixed rate.
At the end of the swap period, the parties usually settle the swap using a compensation payment equal to the difference between the two payments mentioned above, without exchanging the notional amount.
An alternative where the notional amount remains unchanged over the whole period of the swap or is amortized can be chosen depending on the wishes of the client, or a "roller-coaster" swap where the notional amount increases and decreases over time.
The standard term of a transaction from 1 year up to 20 years.
Terms of service
- Accounts in the relevant currencies (limited by the scope of the foreign exchange list of LBBW Bank CZ a.s.).
- The minimum notional amount is CZK 50,000,000 or an equivalent in a foreign currency.
- Master Agreement on Treasury Trades.
- Credit line designed for Treasury transactions.
