Liability Swap

Filed Under » , ,
Dictionary Says

Definition of 'Liability Swap'

An exchange of debt related interest rates between two parties - usually large corporations. In a liability swap, two currently identical (in nominal value) cash flows are exchanged. Usually a variable (floating) rate is exchanged for a fixed rate of income. Swaps are undertaken because each company receives a better rate of interest by trading with the other than they would if they chose a more traditional financing route.
Investopedia Says

Investopedia explains 'Liability Swap'

For example, XYZ may swap a six-month LIBOR interest rate for ABC's six-month fixed rate of 5% on a notional principal of $10 million dollars. Due to the split, XYZ will pay a fixed interest payment of 5%, instead of the floating rate.

A swap will have an initial value of zero because the initial cash flows are the same. Over time, however, this will change as interest rates change and the swap will have either a positive or negative value for each contract holder. In certain cases, the swap can be marked-to-market periodically to clear out the unrealized gains and losses by making any payments due.
Search results for

'Liability Swap'

  • CFA Level 1 Study Guide - Derivatives - Swap Markets and Contracts ...

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/swap-markets-contracts.asp
    ... Adjustments To Financial Statements From Tax Rate Changes; 9.7 Long-Term Liability
    Basics; ... Flows on Put-Call Parity and the Lower Bounds; 15.36 Swap Markets and ...

  • An In-Depth Look At The Swap Market

    http://www.investopedia.com/articles/trading/11/introduction-swap-market.asp
    ... For example, a US-based firm wishes to hedge a future liability it has ... By entering
    into a currency swap, the parties can exchange an equivalent notional amount ...

  • CFA Level 1 Study Guide - Liabilities - Long-Term Liability Basics ...

    http://www.investopedia.com/exam-guide/cfa-level-1/liabilities/long-term-liability-basics.asp
    ... Adjustments To Financial Statements From Tax Rate Changes; 9.7 Long-Term Liability
    Basics; ... Flows on Put-Call Parity and the Lower Bounds; 15.36 Swap Markets and ...

  • CFA Level 1 Study Guide - Liabilities - Current Liability Basics ...

    http://www.investopedia.com/exam-guide/cfa-level-1/liabilities/current-liability-basics.asp
    ... Adjustments To Financial Statements From Tax Rate Changes; 9.7 Long-Term Liability
    Basics; ... Flows on Put-Call Parity and the Lower Bounds; 15.36 Swap Markets and ...

  • CFP Study Guide - Property, Casualty and Liability Insurance ...

    http://www.investopedia.com/exam-guide/cfp/property-casualty-liability-insurance/default.asp
    ... Investment Strategies: 29.1 Introduction; 29.2 Basic Investment Strategies; 29.3
    Swap and Collar ... 32.7 Taxable Income; 32.8 Tax Liability; 32.9 Kiddie Tax; 32.10 ...

  • CFP Study Guide - Property, Casualty and Liability Insurance ...

    http://www.investopedia.com/exam-guide/cfp/property-casualty-liability-insurance/cfp4.asp
    ... Investment Strategies: 29.1 Introduction; 29.2 Basic Investment Strategies; 29.3
    Swap and Collar ... 32.7 Taxable Income; 32.8 Tax Liability; 32.9 Kiddie Tax; 32.10 ...

  • Financial Statements: Long-Term Liabilities | Investopedia

    http://www.investopedia.com/university/financialstatements/financialstatements8.asp
    ... floating' means the company ends up paying a variable rate; a 'pay fixed interest
    rate' swap is one ... Here is the long-term liability section of its balance sheet ...

  • CFA Level 1 Study Guide - Derivatives - Swaps | Investopedia

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/swaps.asp
    ... Adjustments To Financial Statements From Tax Rate Changes; 9.7 Long-Term Liability
    Basics; ... Flows on Put-Call Parity and the Lower Bounds; 15.36 Swap Markets and ...

  • CFA Level 1 Study Guide - Derivatives - Currency Swaps ...

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/currency-swaps.asp
    ... Adjustments To Financial Statements From Tax Rate Changes; 9.7 Long-Term Liability
    Basics; ... Flows on Put-Call Parity and the Lower Bounds; 15.36 Swap Markets and ...

  • CFA Level 1 Study Guide - Derivatives - Interest Rate and Equity ...

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/interest-rate-equity-swaps.asp
    ... Adjustments To Financial Statements From Tax Rate Changes; 9.7 Long-Term Liability
    Basics; ... Flows on Put-Call Parity and the Lower Bounds; 15.36 Swap Markets and ...

Related Articles

Trading Center
Partner Links