Hara-Kiri Swap

AAA

DEFINITION of 'Hara-Kiri Swap'

An interest rate or cross-currency swap devoid of any profit margin for the originator. The term gets its name from Japanese banks' and securities houses' 1980s strategy of offerings very low rates in order to obtain business. In Japan, hara-kiri is a form of slow ritual suicide; the swaps were dubbed hara-kiri because they turned out to be a form of financial suicide for the institutions that offered them.

INVESTOPEDIA EXPLAINS 'Hara-Kiri Swap'

Although hara-kiri swaps provide no intrinsic benefits to the parties that offer them, there are a variety of extrinsic benefits to consider. For example, the practice often involves USD/JPY cross-currency swaps, which have typically been attached to new issues with the aim of obtaining a leading underwriting position.

RELATED TERMS
  1. Circus Swap

    A combination of an interest rate swap and a currency swap in ...
  2. Constant Maturity Swap - CMS

    A variation of the regular interest rate swap. In a constant ...
  3. Currency Swap

    A swap that involves the exchange of principal and interest in ...
  4. Forward Swap

    A swap agreement created through the synthesis of two swaps differing ...
  5. Swap Rate

    The rate of the fixed portion of a swap as determined by its ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. Are High-Yield Bonds Too Risky?
    Bonds & Fixed Income

    Are High-Yield Bonds Too Risky?

  2. An Introduction To Swaps
    Options & Futures

    An Introduction To Swaps

  3. The History Of Money: From Barter To ...
    Forex Education

    The History Of Money: From Barter To ...

  4. Pick the Right Brokerage Account for ...
    Options & Futures

    Pick the Right Brokerage Account for ...

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center