Swap rate is the fixed rate that sets the market value of a given swap at initiation to zero. They are the borrowing rates between financial institutions, usually with credit ratings of A/AA equivalent. Swap rates are calculated using the fixed rate leg of interest rate swaps. Swap rates form the basis of the swap curve (also known as the par curve or LIBOR curve). A given swap rate is essentially equal to the risk free rate plus the interest rate risk of the swap.
In most emerging markets with underdeveloped government bond markets, the swap curve is more complete than the treasury yield curve, and is thus used as the benchmark curve.
Famous quotes containing the words swap and/or rate:
“If we should swap a good library for a second-rate stump speech and not ask for boot, it would be thoroughly in tune with our hearts. For deep within each of us lies politics. It is our football, baseball, and tennis rolled into one. We enjoy it; we will hitch up and drive for miles in order to hear and applaud the vitriolic phrases of a candidate we have already reckoned we’ll vote against.”
—Federal Writers’ Project Of The Wor, U.S. public relief program (1935-1943)
“We all run on two clocks. One is the outside clock, which ticks away our decades and brings us ceaselessly to the dry season. The other is the inside clock, where you are your own timekeeper and determine your own chronology, your own internal weather and your own rate of living. Sometimes the inner clock runs itself out long before the outer one, and you see a dead man going through the motions of living.”
—Max Lerner (b. 1902)