Asset swap

Asset swap,

Definition of Asset swap:

  1. Arrangement in which one type of asset (such as one generating capital gain) is exchanged for another type (such as one generating regular income) to achieve better asset-liability matching.

  2. An asset swap is similar in structure to a plain vanilla swap with the key difference being the underlying of the swap contract. Rather than regular fixed and floating loan interest rates being swapped, fixed and floating assets are being exchanged.

  3. All swaps are derivative contracts through which two parties exchange financial instruments. These instruments can be almost anything, but most swaps involve cash flows based on a notional principal amount agreed upon by both parties. As the name suggests, asset swaps involve an actual asset exchange instead of just cash flows.

How to use Asset swap in a sentence?

  1. There are two parties in an asset swap transaction: a protection seller, which receives cash flows from the bond, and a swap buyer, which hedges risk associated with the bond by selling it to protection seller.
  2. An asset swap is used to transform cash flow characteristics to hedge risks from one financial instrument with undesirable cash flow characteristics into another with favorable cash flow.
  3. The buyer pays an asset swap spread, which is equal to LIBOR plus (or minus) a pre-calculated spread.

Meaning of Asset swap & Asset swap Definition

Asset Swap,

Asset Swap:

  1. Asset conversion has a simple vanilla exchange-like structure, with the main difference being that the exchange is contractual. Instead of negotiating fixed and floating interest rates on loans, fixed and floating assets are exchanged.

    • The use of asset switches to change the characteristics of cash flows goes to another instrument with another favorable cash flow features to save the risk of a financial instrument with unwanted cash flow features.
    • There are already two parties to the exchange: the protection seller who receives the Flux de Treasury de-legalization and accepts the exchange who understands the risk associated with the obligation to sell the de-protection.
    • The buyer pays a different LIBOR plus (or less) difference in the previous asset exchange.

Literal Meanings of Asset Swap

Asset:

Meanings of Asset:
  1. Something useful or valuable, individual or quality.

Sentences of Asset
  1. Immediate reflexes are your main benefit

Synonyms of Asset

aid, selling point, merit, value, virtue, blessing, attraction, bonus, gift, advantage, help, recommendation, forte, benefit, strength, strong point, strong suit, attractive feature, boon, beauty, long suit, talent, resource, good point

Swap:

Meanings of Swap:
  1. Participate in an exchange.

  2. The process of exchanging one thing for another.

Sentences of Swap
  1. We exchange phone numbers

  2. Let's exchange

Synonyms of Swap

barter, reciprocate, bandy, exchange, substitution, switch, interchange, give and take, trade, trade-off, pass back and forth