Wednesday, April 02, 2008

Great primer on Derivatives!

Of Knock-ins, Knock-outs & KIKOs:
"There are a hundred ways in which derivative products can be structured. Ranju Sarkar spoke to experts to bring you a primer on derivatives.

One look-in: "
Interest rate swaps: In interest rate swaps, you are addressing only the interest rate part of the loan. If a company takes a view that the interest rates are going to be higher and if it has borrowed in floating rate, say linked to the LIBOR (London Inter Bank Rate), then it could do an interest rate swap—it pays a fixed rate and receives a floating rate from the bank."
Good stuff. Great for class!

No comments: