1. Interest Rate Swap (IRS ... - Finance Trainer

Cash flow on September, 6 th 2010:
I) – II) = net cash flow
if I) < II) A pays the difference to B
if I) > II) B pays the difference to A
Asset swap and liability swap
The terms "asset swap" and "liability swap" are used according to the side of the balance
sheet that is changed by the swap transaction:
From the investor’s point of view, an asset swap is the swapping of a
fixed interest rate investment into a floating rate investment (= fixed-rate payer swap)
floating interest rate into a fixed rate investment (= fixed-rate receiver swap).
A liability swap deals with the re-financing side of the balance. It is a swap that turns a
fixed into a floating refinancing (= fixed-rate receiver swap)
floating into a fixed refinancing (= fixed-rate payer swap).
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