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Absolute Rate

What is 'Absolute Rate'

The fixed portion of an interest-rate swap, expressed as a percentage rather than as a premium or a discount to a reference rate.

Explaining 'Absolute Rate'

The absolute rate is a combination of the reference rate and the premium or discounted fixed percentage. For example, if the LIBOR is 3% and the fixed interest portion of the swap is at a 7% premium, the absolute rate is 10%.


Further Reading


Mean-absolute deviation model
www.tandfonline.com [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …

Valuing risky fixed rate debt: An extensionValuing risky fixed rate debt: An extension
www.jstor.org [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …

Ex ante costs of violating absolute priority in bankruptcyEx ante costs of violating absolute priority in bankruptcy
onlinelibrary.wiley.com [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …

Different measures in testing absolute purchasing power parityDifferent measures in testing absolute purchasing power parity
www.tandfonline.com [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …

Equilibrium relations in a capital asset market: A mean absolute deviation approachEquilibrium relations in a capital asset market: A mean absolute deviation approach
link.springer.com [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …

A mean-absolute deviation-skewness portfolio optimization modelA mean-absolute deviation-skewness portfolio optimization model
link.springer.com [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …

Mean-absolute-deviation versus least-squares regression estimation of beta coefficientsMean-absolute-deviation versus least-squares regression estimation of beta coefficients
www.jstor.org [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …

Constant absolute risk aversion preferences and constant equilibrium interest ratesConstant absolute risk aversion preferences and constant equilibrium interest rates
onlinelibrary.wiley.com [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …

Purchasing power parity based on effective exchange rate and cointegration: 25 LDCs' experience with its absolute formulationPurchasing power parity based on effective exchange rate and cointegration: 25 LDCs' experience with its absolute formulation
www.sciencedirect.com [PDF]
… In this case, we interchange the risk and the rate of return and consider the following problem … American Journal of Agricultural Economics, 53: 53–62 … [Crossref], [Google Scholar]; Konno, H. 2003. Portfolio optimization of small scale funds using mean-absolute deviation model …



Q&A About Absolute Rate


What does absolute rate mean?

Absolute rate means a combination of reference rates and premiums or discounts.

What is the fixed portion of an interest-rate swap?

The fixed portion of an interest-rate swap is a percentage that represents the difference between the reference rate and the premium or discount.

How do you calculate absolute rates?

You can calculate it by subtracting any discount from 100%, multiplying by 100, adding any premium to this number, and dividing by 100. For example, if LIBOR is at 5%, then you can take 95%-5%=90%, multiply that by 100=9000, add 5%-0%=5%, divide that by 100=0.05. This gives you 9%.

What are some examples of absolute rates?

An example would be if LIBOR was at 3% and there was a 7% premium, then the absolute rate would be 10%. Another example would be if LIBOR was at 3% but there was no premium, then the absolute rate would be 0%.