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)
“Unless a group of workers know their work is under surveillance, that they are being rated as fairly as human beings, with the fallibility that goes with human judgment, can rate them, and that at least an attempt is made to measure their worth to an organization in relative terms, they are likely to sink back on length of service as the sole reason for retention and promotion.”
—Mary Barnett Gilson (1877–?)