Interest rate cover: via SWAP
An interest-rate SWAP is an interest-rate derivatives operation between a company and Caja Navarra by which the two undertake to exchange fixed-rate flows for variable-rate flows.
Through a swap, a company interested in covering itself in the face of reviewable interest-rate fluctuations - normally Euribor - is prepared to pay certain future streams at a fixed rate in exchange for receiving future flows at floating rates as a result of applying variable interest rates - Euribor.
The swap rate – which is how these operations are priced – depends on:
- Interest rates
- Period of coverage
- Volatility of interest rates, etc.
An interest-rate swap involves no cost to the company. The operation is settled by differences which will be to the benefit or detriment of the customer depending on whether the fixed rate agreed on is lower or higher than the reviewed variable rate.
The commercial contracts which cater for operations of this kind are:
- The “Contrato Marco de Operaciones Financieras” (CMOF – Framework Contract for Financial Operations) of the Asociación Española de Banca (AEB – Spanish Banking Association) signed by both parties,
- Confirmation of the operation sent to the customer by Caja Navarra.
The Caja Navarra business office can provide you with full information and advice on how to contract these operations.
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