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elearning > Asset swaps

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Learn about the following:

How asset swaps work. Why investors use asset swaps. Par/par structures. The risks asset swaps produce.

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Course Summary

Asset swaps menuAsset swaps structureAsset swaps payments

Asset swaps breaksAsset swaps par parAsset swaps risks

  • 35 minutes
  • 8 question multiple choice test
  • How asset swaps work
  • Why investors use asset swaps
  • Par/par structures
  • The risks

Asset Swaps - the details

1. The asset swap structure

  • Combination of fixed rate bond and interest rate swap
  • Why investors do this
  • Minimising interest rate risk
  • Benefits, interest rate hedging, matching funding costs
  • Libor margin
  • Bond yield relative to swap rate 

2. Par/par structures

  • What they are
  • Why investors like this
  • Bonds at a premium and bonds at a discount to par
  • Up-front payments
  • Credit exposures 

3. Strengths & weaknesses

  • Enhanced returns
  • Credit risk on the asset
  • Liquidity of the asset
  • Liquidity of the swap
  • Structural complexity
  • Basis swaps
  • Counterparty credit exposure on swap 

4. Summary

5. Test

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