Investopedia

Continue to Site »

Amortizing Swap

Filed Under »
Dictionary Says

Definition of 'Amortizing Swap'

An exchange of cash flows, one of which pays a fixed rate of interest and one of which pays a floating rate of interest, and both of which are based on a notional principal amount that decreases. In an amortizing swap, the notional principal decreases periodically because it is tied to an underlying financial instrument with a declining (amortizing) principal balance, such as a mortgage.
Investopedia Says

Investopedia explains 'Amortizing Swap'

The notional principal in an amortizing swap may decline at the same rate as the underlying or at a different rate which is based on the market interest rate of a benchmark like mortgage interest rates or the London Interbank Offered Rate. The opposite of an amortizing swap is an accreting principal swap - its notional principal increases over the life of the swap. In most swaps, the amount of notional principal remains the same over the life of the swap.

Articles Of Interest

  1.

    The Barnyard Basics Of Derivatives

    This tale of a fictional chicken farm is a great way to learn how derivatives work in the market.

  2. A Guide To Real Estate Derivatives

    These instruments provide exposure to the real estate market without having to buy and sell property.

  3. Are Derivatives Safe For Retail Investors?

    These vehicles have gotten a bad rap in the press. Find out whether they deserve it.

  4. An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.

  5. The Advantages Of Bond Swapping

    This technique can add diversity to your portfolio and lower your taxes. Find out how.

  6. An Introduction To Structured Products

    Learn a simple way to bring the benefits of derivatives into your portfolio.

  7. How Companies Use Derivatives To Hedge Risk

    Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.

  8. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally expensed based on the time period over which the asset was ...

  9. Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.

  10. America's Loss Is The Currency Market's Gain

    The Smithsonian Agreement hurt the U.S. in the short-term, but was necessary in furthering real market-driven exchange rates.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  2. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  3. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  4. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  5. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  6. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
Trading Center