问题来源:
Swaps
Interest Rate Swaps
Currency Swaps
Interest Rate Swaps
A swap is where two counterparties agree to pay each other's interest payments. This may be in the same currency (an interest rate swap) or in different currencies (a currency swap).
A useful approach to adopt in an exam for a swap organised by a bank is to assume - unless told otherwise - that the variable interest rate payment is at LIBOR. This is what normally happens in reality.
Altrak is interested in the idea of using a swap arrangement to create a fixed rate for a long-term loan of $20 million that is also being arranged. The swap will be organized and underwritten by a bank which has found another company (Company A) willing to participate in a swap arrangement; the merchant bank will charge a fee of 0.20% to both companies. Company A is a retailer with low levels of gearing; it has reviewed is balance of existing fixed and variable rate finance and wants to increase its exposure to variable rate finance.
The borrowing rates available to Altrak and to Company A are:
|
Altrak |
Company A |
Fixed |
6.50% |
5.55% |
Variable |
LIBOR + 1.00% |
LIBOR + 0.75% |
Required
(a) Explain why Alrak wants fixed rate loan at the same time as Company A wants variolate.
(b) Identify whether a swap could be organized to the benefit of both companies.
Alirak could have
Different expectations about the future direction of interest rates.
A different attitude to risk-Alrak's business risk or financial risk could be higher.
Step 1 assess potential for gain from swap
|
Altrak |
Company A |
Difference |
Fixed |
6.50% |
5.55% |
0.95% Company A cheaper |
Variable |
LIBOR + 1.00% |
LIBOR + 0.75% |
0.25% Company A cheaper |
|
|
|
Difference of differences = 0.95% - 0.25% = 0.70% |
If a swap uses company A's comparative advantage in fixed rate finance, as is suggested here, then a gain of 0.70% (before fees) is available. This falls to 0.70 - (2 × 0.20%) = 0.30% after fees. If this is split evenly it gives a gain of 0.15% to each party.
Step 2- swap, variable rate at LIBOR, designed to splitting gain 50 : 50, ie 0.15% each
迟老师
2021-11-03 10:18:01 798人浏览
这里的5.15%是假设出来的,方便后期比较用Swaps好,还是不用Swaps好一些
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