Zero Basis Risk Swap - ZEBRA


DEFINITION of 'Zero Basis Risk Swap - ZEBRA'

A swap agreement between a municipality and a financial intermediary.

Also known as a "perfect swap" or "actual rate swap".

BREAKING DOWN 'Zero Basis Risk Swap - ZEBRA'

The municipality pays a fixed rate of interest to the financial intermediary and receives a floating rate of interest in return. The floating rate received is equal to the floating rate on the outstanding floating rate debt initially issued by the municipality to the public.

  1. Swap

    A derivative contract through which two parties exchange financial ...
  2. Financial Intermediary

    An entity that acts as the middleman between two parties in a ...
  3. Floater

    A bond or other type of debt whose coupon rate changes with market ...
  4. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  5. Arbitrage Bond

    A debt security with a lower interest rate issued by a municipality ...
  6. Basis Rate Swap

    A type of swap in which two parties swap variable interest rates ...
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