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Rate Anticipation Swap

What is 'Rate Anticipation Swap'

A type of swap in which bonds are exchanged according to their current duration and predicted interest rate movements. A rate anticipation swap is often made in order to take advantage of more profitable bond opportunities. Rate anticipation swaps are speculative in nature, since they depend on the outcome of the expected interest rate change. Various bond types respond differently to rising or falling interest rates and those who participate in rate anticipation swaps generally choose bonds based on performance.

Explaining 'Rate Anticipation Swap'

As an example, investors may swap short-term bonds for long-term bonds if interest rates are expected to decline. Conversely, investors may swap longer-term bonds for short-term bonds if interest rates are expected to rise. A swap is an exchange of one security for another to change the maturity, the quality of the issues in a bond portfolio, or due to a change in the investor's goals and strategies.


Further Reading


Bond Swaps And The Application Of Duration
www.jstor.org [PDF]
… APPLICATIONS A. Anticipating Sovereign Debt Crises: Argentina (2001-2002) The recent default of Argentina … Daily data on US dollar swap rates was obtained from Primark Datastream … correlation _ 020 0.00 0.00 0.20 - -0.20 Correlation Between Maximum Recovery Rate -0-49 …

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]
… APPLICATIONS A. Anticipating Sovereign Debt Crises: Argentina (2001-2002) The recent default of Argentina … Daily data on US dollar swap rates was obtained from Primark Datastream … correlation _ 020 0.00 0.00 0.20 - -0.20 Correlation Between Maximum Recovery Rate -0-49 …

Fiscal policy events and interest rate swap spreads: Evidence from the EUFiscal policy events and interest rate swap spreads: Evidence from the EU
www.sciencedirect.com [PDF]
… APPLICATIONS A. Anticipating Sovereign Debt Crises: Argentina (2001-2002) The recent default of Argentina … Daily data on US dollar swap rates was obtained from Primark Datastream … correlation _ 020 0.00 0.00 0.20 - -0.20 Correlation Between Maximum Recovery Rate -0-49 …

Knowledge production in financial markets: credit default swaps, the ABX and the subprime crisisKnowledge production in financial markets: credit default swaps, the ABX and the subprime crisis
www.tandfonline.com [PDF]
… APPLICATIONS A. Anticipating Sovereign Debt Crises: Argentina (2001-2002) The recent default of Argentina … Daily data on US dollar swap rates was obtained from Primark Datastream … correlation _ 020 0.00 0.00 0.20 - -0.20 Correlation Between Maximum Recovery Rate -0-49 …

FX swaps: Implications for financial and economic stabilityFX swaps: Implications for financial and economic stability
papers.ssrn.com [PDF]
… APPLICATIONS A. Anticipating Sovereign Debt Crises: Argentina (2001-2002) The recent default of Argentina … Daily data on US dollar swap rates was obtained from Primark Datastream … correlation _ 020 0.00 0.00 0.20 - -0.20 Correlation Between Maximum Recovery Rate -0-49 …

Swaps, expectations, and exchange ratesSwaps, expectations, and exchange rates
www.sciencedirect.com [PDF]
… APPLICATIONS A. Anticipating Sovereign Debt Crises: Argentina (2001-2002) The recent default of Argentina … Daily data on US dollar swap rates was obtained from Primark Datastream … correlation _ 020 0.00 0.00 0.20 - -0.20 Correlation Between Maximum Recovery Rate -0-49 …

The relationship between credit default swap spreads, bond yields, and credit rating announcementsThe relationship between credit default swap spreads, bond yields, and credit rating announcements
www.sciencedirect.com [PDF]
… APPLICATIONS A. Anticipating Sovereign Debt Crises: Argentina (2001-2002) The recent default of Argentina … Daily data on US dollar swap rates was obtained from Primark Datastream … correlation _ 020 0.00 0.00 0.20 - -0.20 Correlation Between Maximum Recovery Rate -0-49 …



Q&A About Rate Anticipation Swap


Are rate anticipation swaps speculative in nature?

Yes, they depend on the outcome of the expected interest rate change.

What does it mean to take advantage of more profitable bond opportunities?

It means that investors can make money by exchanging bonds with different maturities.

Why do investors choose bonds based on performance when participating in rate anticipation swaps?

Because different types of bonds respond differently to rising or falling interest rates.

What is a rate anticipation swap?

A type of swap in which bonds are exchanged according to their current duration and predicted interest rate movements.