High Return Investments

Interest rate swap

A swap is an agreement between two counterparties to exchange something (one
"leg" of the swap) for something else (the other "leg"). These things can be
anything that has a financial value. Typically they are quantities
determined by some form of interest rate, in an interest rate swap or derivative.

Interest rate swaps take many forms. Typically they consist of a number of
component swaps on a frequent basis according to a predetermined payment schedule.

Usually, one leg involves quantities that are known in advance, known as the
"fixed leg", the other involves quantities that are not known in advance,
known as the "floating leg". The floating leg must therefore be reset
against an agreed "reference rate", which will become known at some point
before the payment or settlement takes place. Ideally, the determination of
the reference rate must be outside the control of the counterparties,
otherwise a conflict of interest will arise. However, many financial
products in the retail market (such as capped mortgages) involve reference
to a managed interest rate which is actually controlled by the mortgage
provider. Typically, the reference rate is some figure made publicly
available by a third party information vendor, or by government agencies.
For example, BBA LIBOR.

Once a component of the floating leg is fixed (or "reset"), the fixed and
floating components can be swapped or settlement (typically one or two days
after the fixing date).

The present value of a vanilla swap can easily be computed using standard
methods of determining the present value of the components.

Investment FreshNews:

British finance minister paints bleak picture of economy (AFP via Yahoo! News)
Sat, 19 Jul 2008 00:25:20 GMT
Britain's economic downturn is worse than previously thought and there is no extra money available for public spending, finance minister Alistair Darling said in an interview published Saturday.

IAC Raises $2 Billion in Debt to Finance Spinoff Plan (Update2) (Bloomberg.com)
Fri, 18 Jul 2008 21:50:44 GMT
July 18 (Bloomberg) -- IAC/InterActiveCorp , the Internet company controlled by Barry Diller , signed agreements to raise almost $2 billion to finance the spinoffs of three divisions, part of a plan to break up the company.

$2.45b sale to finance major mine expansion (Toowoomba Chronicle)
Fri, 18 Jul 2008 23:36:25 GMT
THE sale of a Central Queensland coal project will help finance a massive expansion of the New Acland coal mine near Oakey.

Fitch Confirms Indiana Finance Authority Lease Bonds, Series 2003C&D at 'AA' (Centre Daily Times)
Fri, 18 Jul 2008 22:55:21 GMT
Fitch Ratings has confirmed its underlying 'AA' rating to the Indiana Finance Authority's (authority) conversion of $71,250,000 facilities revenue refunding bonds, series 2003C and 2003D to term-rate period from auction-rate securities. The bonds are expected to be offered via negotiation on July 24. Fitch also affirms at 'AA' approximately $3 billion of Indiana's appropriation debt. The Rating ...

Leading Structured Finance Lawyers, William "Butch" Cullen and Janet Barbiere Join Kaye Scholer LLP (Centre Daily Times)
Fri, 18 Jul 2008 20:13:33 GMT
Kaye Scholer LLP announced that William J. "Butch" Cullen and Janet A. Barbiere have joined the firm's Corporate & Finance Department, as Partners in its New York office, effective today.

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