Interest
Rate Hedging
offers the
following
services:
Call and Time Deposits
Corporate Treasury is able to quote competitive pricing for all periods from overnight up to one year and beyond.
Interest Rate Swap (IRS)
An interest rate swap allows a customer to exchange cash flows from one stream of interest payments for another. For example a borrower with a medium term loan who pays floating rates can switch to fixed rate, locking in an advantage in a period of low interest rates.
Forward Rate Agreements (FRA's)
A forward rate agreement guarantees the interest rate on a loan or deposit starting on a future date. By buying a FRA, the client knows the maximum rate he will pay on a loan, and by selling a depositor fixes the minimum rate on a deposit.
Interest
Rate Options
Interest Rate Caps
The purchase of an interest rate cap allows a borrower to know in advance the maximum rate he will pay on a borrowing while allowing him to take advantage of any fall in rates.
Interest Rate Floor
The opposite of a cap, allows a depositor to know in advance the minimum he will receive on a deposit while taking advantage of rates moving in his favour.
Interest Rate Collar
In a collar, the buyer of the option benefits from the protection against a move in interest rates, but pays back some of the advantage he will gain from a significant move in his favour. He is therefore aware of the maximum and minimum rate he will pay or receive. This is a classic structure to reduce the premium payable for a standard cap or floor.
Interest Rate Corridor
This is another strategy for reducing premiums. A borrower sets his option strike at the maximum rate he wishes to pay and then sets another rate higher than his original strike above which he will start to pay again, thus reducing his premium on the original cap. The reverse can also be transacted for a depositor.
