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. Stock Safety: Top 3 Ways to Limit Your ...
    Options & Futures

    Stock Safety: Top 3 Ways to Limit Your ...

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