Basic Types of Interest Rate Swap
There are three basic types of interest rate swap. They are the floating-for-floating interest rate swaps, the fixed-for-fixed interest rate swaps and the fixed-for-floating interest rate swaps. The various types of interest rate swaps are available in both same and different currencies. Technically speaking it is impossible to have a fixed-for-fixed interest rate swap in one currency.
Fixed-for-Floating Rate Swap in Same Currency
The fixed-for-floating rate swaps available in the same currency are a type of interest rate swap. They are often employed in order to change an asset or a liability with fixed rate into an asset or liability with a floating rate. An asset or a liability with a floating rate can also be transformed into an asset or liability with a fixed rate with the help of a fixed-for-floating interest rate swap.
Fixed-for-Floating Rate Swap in Different Currencies
The fixed-for-floating rate swaps in separate currencies are a variant of interest rate swaps. The fixed-for-floating interest rate swaps in different currencies are normally used so that an asset or a liability having a fixed rate in a currency could be changed into a liability or an asset having a floating rate in another currency. The reverse is true as well.
Floating-for-Floating Rate Swap in Same Currency with a Separate Index
The floating-for-floating rate swaps are kind of interest rate swaps that are available in the same currency but have another index. Whenever there is a requirement of thinking about the spread involved in indexes that are constricting or extending the floating-for-floating rate swaps that are available in the same currency, different indexes are used. This form of interest rate swap can also be used for protecting the risks that are involved in the movement of such indexes.
Floating-for-Floating Rate Swaps in Different Currencies
The floating-for-floating rate swaps available in different currencies are another kind of interest rate swap. This interest rate swap proves to be of great use for specific financial transactions.
Fixed-for-Fixed Rate Swaps in Different Currencies
The fixed-for-fixed rate swaps available in separate currencies are also a type of interest rate swaps. This interest rate swap is extensively used in the global financial market.
Last Updated on : 1st July 2013