Liability swap
An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so as to provide a better match with its assets. |
Similar financial terms
Unlimited liabilityFull liability for the debt and other obligations of a legal entity. Generally, partners of a partnership and sole propietors have unlimited liability.
Limited-liability instrument
A security, such as a call option, in which the owner can only lose his initial investment.
Limited liability
Limitation of possible loss to what has already been invested.
Liability funding strategies
Investment strategies that select assets so that cash flows will equal or exceed the client's obligations.
Liability
A financial obligation, or the cash outlay that must be made at a specific time to satisfy the contractual terms of such an obligation.
Contingent pension liability
Under ERISA, the firm is liable to the plan participants for up to 39% of the net worth of the firm.
Limited Liability Company (LLC)
Consists of member owners and a manager, at a minimum. Similar to a corporation that is taxed as a partnership or as an S-corporation. More specifically, it combines the more favorable characteristics of a corporation and a partnership. The LLC structure permits the complete pass-through of tax advantages and operational flexibility found in a partnership, operating in a corporate-style structure, with limited liability as provided by the state's laws.
Limited liability partnership (LLP)
A form of the LLC favored and used for professional associations, such as accountants and attorneys.
Limited liability limited partnership (LLLP)
Intended to protect the general partners from liability. Previously, the general partner was a corporation to protect the principals from personal liability. Under the LLLP, an individual could be a general partner and have limited personal liability.
Amortizing swap
An interest rate swap with a decreasing notional principal amount.
Volatility swap
A volatility swap is a financial instrument where the realized volatility during an accrual period is exchanged for a fixed volatility. Both percentage volatilities are applied to a notional principal.
Total return swap
A total return swap is an exchange of a return on a debt security for LIBOR plus a spread. The return on the debt security includes income such as coupons and the change in its value.
Swaption
A swaption is an option to enter into an interest rate swap where a specified fixed rate is exchanged for floating.
Swap rate
The fixed rate in an interest rate swap that causes the swap to have a value of zero. It can be thought of as the Internal Rate of Return (IRR) of a swap.
Swap
A swap is an agreement to exchange a series of variable cash flows for a fixed amount of cash flows in the future according to a prearranged formula.
Step-up swap
A swap where the principal increases over time in a predetermined way.
LIBOR-in-Arrears Swap
A swap where the interest paid on a date is determined by the interest rate observed on that date (not by the interest observed on the previous payment date).
Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates rise (decline).
Tax swap
Swapping two similar bonds to receive a tax benefit.
Swap sale
A swap sale (also referred to as a swap assignment) is a transaction that ends one counterparty's role in an interest rate swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.
Swap reversal
An interest rate swap designed to end a counterparty's role in another interest rate swap, accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.
Swap buy-back
The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.
Substitution swap
A swap in which a money manager exchanges one bond for another bond that is similar in terms of coupon, maturity, and credit quality, but offers a higher yield.
Rate anticipation swaps
An exchange of bonds in a portfolio for new bonds that will achieve the target portfolio duration, based on the investor's assumptions about future changes in interest rates.
Put swaption
A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate payer. The writer of the swaption therefore becomes the floating-rate receiver/fixed-rate payer.
Pure yield pickup swap
Moving to higher yield bonds.
Call swaption
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The writer therefore becomes the fixed-rate receiver/floating rate payer.
Circus swap
A fixed rate currency swap against floating U.S. dollar LIBOR payments.
Currency swap
An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency.
