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January 3, 2012

What is an Interest Rate Swap?

I came across this blog post and felt I should help, so I put together a simple explanation for what a rate swap is. I’m hoping regular reader know this stuff, but have a look and let me know any feedback.

The explanation uses Panasonic as maker of TVs who use the Bond market to borrow, to expand production, and then as interest rates rise, they use a rate swap to fix their payments.

Read the PDF here, and ISDA here

And also the wikipedia entry here


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