BROWSE

Callable Swap

What is 'Callable Swap'

An exchange of cash flows in which one counterparty makes payments based on a fixed interest rate, the other counterparty makes payments based on a floating interest rate and the counterparty paying the fixed interest rate has the right to end the swap before it matures.





An investor might choose a callable swap if interest rates are expected to change in a way that would adversely affect the fixed rate payer.

Explaining 'Callable Swap'

The additional features of a callable swap make it more expensive than a plain vanilla interest rate swap - the fixed rate payer will pay a higher interest rate and possibly might have to pay additional funds to purchase the option. The opposite of a callable swap is a putable swap, which allows the floating interest rate payer to end the swap early.


Further Reading


Interest rate swaps in an agency theoretic model with uncertain interest rates
www.sciencedirect.com [PDF]
… rate funding also have several options: (1) non-callable bonds, (2) callable bonds, and … Hammond, GMS, 1987, Recent developments in the swap market, Bank of England Quarterly Review, 66 … Loeys, JG, 1985, Interest rate swaps: A new tool for managing risk, Federal Reserve …

Swaps: A zero sum game?Swaps: A zero sum game?
www.jstor.org [PDF]
… rate funding also have several options: (1) non-callable bonds, (2) callable bonds, and … Hammond, GMS, 1987, Recent developments in the swap market, Bank of England Quarterly Review, 66 … Loeys, JG, 1985, Interest rate swaps: A new tool for managing risk, Federal Reserve …

The role of interest rate swaps in corporate financeThe role of interest rate swaps in corporate finance
papers.ssrn.com [PDF]
… rate funding also have several options: (1) non-callable bonds, (2) callable bonds, and … Hammond, GMS, 1987, Recent developments in the swap market, Bank of England Quarterly Review, 66 … Loeys, JG, 1985, Interest rate swaps: A new tool for managing risk, Federal Reserve …

Alternative explanations of interest rate swaps: A theoretical and empirical analysisAlternative explanations of interest rate swaps: A theoretical and empirical analysis
www.jstor.org [PDF]
… rate funding also have several options: (1) non-callable bonds, (2) callable bonds, and … Hammond, GMS, 1987, Recent developments in the swap market, Bank of England Quarterly Review, 66 … Loeys, JG, 1985, Interest rate swaps: A new tool for managing risk, Federal Reserve …

Beyond plain vanilla: a taxonomy of swapsBeyond plain vanilla: a taxonomy of swaps
search.proquest.com [PDF]
… rate funding also have several options: (1) non-callable bonds, (2) callable bonds, and … Hammond, GMS, 1987, Recent developments in the swap market, Bank of England Quarterly Review, 66 … Loeys, JG, 1985, Interest rate swaps: A new tool for managing risk, Federal Reserve …


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