Absolute Rate

AAA

DEFINITION of 'Absolute Rate'

The fixed portion of an interest-rate swap, expressed as a percentage rather than as a premium or a discount to a reference rate.

INVESTOPEDIA EXPLAINS 'Absolute Rate'

The absolute rate is a combination of the reference rate and the premium or discounted fixed percentage. For example, if the LIBOR is 3% and the fixed interest portion of the swap is at a 7% premium, the absolute rate is 10%.

It is sometimes also referred to as an absolute swap yield.

RELATED TERMS
  1. LIBOR

    LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ...
  2. Interest Rate Swap

    An agreement between two parties (known as counterparties) where ...
  3. Premium

    1. The total cost of an option. 2. The difference between the ...
  4. Swap

    Traditionally, the exchange of one security for another to change ...
  5. Discount

    The condition of the price of a bond that is lower than par. ...
  6. ISDA Master Agreement

    A standard agreement used in over-the-counter derivatives transactions.
Related Articles
  1. The Alphabet Soup Of Credit Derivative ...
    Mutual Funds & ETFs

    The Alphabet Soup Of Credit Derivative ...

  2. Credit Default Swaps: An Introduction
    Bonds & Fixed Income

    Credit Default Swaps: An Introduction

  3. ISDA Master Agreement
    Investing Basics

    ISDA Master Agreement

  4. Credit Default Swaps: What Happens In ...
    Insurance

    Credit Default Swaps: What Happens In ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center