The Mechanics of Interest Rate Swaps

You never know who you’ll meet in life. I had the pleasure of meeting a guy the other day who was very passionate about his job as a derivatives trader. As always, I had a chat with him about his job and learned about the basics of OTC Clearing. Although they’re commonly used by two individual parties to exchange interest rate payments with one another, companies also use swap rate transaction.

They’re most useful when one party (an individual or company) wants to receive a payment with a variable interest rate. The other party agrees to the transaction to receive a fixed rate payment over the other, mainly to eliminate any future risks.

The mechanics of interest rate swaps

The mechanics of interest rate swaps, when put that way, are pretty simple. Here are those mechanics in detail:

  • Two parties who want to Swap Rate agree to the transaction.
  • One party may want to swap on a bond that pays the current LIBOR rate.
  • The other party may want to swap on a bond paying a fixed payment of 5 percent.
  • The agreement between both parties requires the variable rate party to pay the LIBOR rate, plus an additional 2 percent, to provide an equivalent exchange with the fixed rate percentage (5 percent).
  • Both parties agree to a base value that’s used to calculate their cash flow exchange, in addition to the length and terms of the swap rate transaction.

An Interest Rate Swap allows both parties to ‘reap’ benefits from each other’s’ interest rate thresholds. One party may receive benefits from hedging risks associated with their securities with floating interest rates. The other party may benefit from taking advantage of the potential rewards afforded to them, while holding a more ‘modest’ financial asset.

Why interest rates work for parties

Most parties interested in a swap rate transaction engage for specific reasons related to their financial situation.

Individuals choose swap rate transactions to gain a favourable interest rate in regards to their financial transactions. Businesses, on the other hand, usually have other intentions.

Commercial intentions usually drive some businesses into a swap rate exchange with another company. This usually applies to businesses with specific goals related to their financing requirements. An interest rate exchange is generally the best way for them to accomplish those goals.

Banks and other financial institutions usually benefit from OTC Derivatives Clearing. They typically utilize swap rate transactions to ensure their own revenue streams match their liabilities. Hedge funds also benefit from interest rate swaps, since they’re able to cut risks without losing any potential rewards they may reap from the current financial market.

A Look at Osteopathy and Its Benefits

I went to a music Festival in France a couple of months ago and while it was great fun, I had an incident where I really hurt my back and foot. My GP referred me to a chiropodist for my foot and an osteopath for my back; I found them to be extremely helpful.

Similarly to a physiotherapist, an osteopath detects, prevents and treats health issues by stretching, moving and massaging the muscles and joints. It is a type of non-invasive and drug-free medicine that is used for the wellness of the whole body. This type of medicine also treats and strengthens the musculoskeletal structure including the spine, muscles and joints.

The main aim of this osteopathy is to have a positive effect on the nervous system, the lymphatic and the circulatory system. In fact, this medicine is a completely holistic approach towards health care. Osteopath not only treats the target area, but also uses manual techniques in order to balance the various systems of the body. This way it provides well being and good health.

The philosophy of osteopathy something that makes its unique from the other medical disciplines. The main aim is to make sure that all the body parts are working together in integrated manner. It is seen that when one part of the body is restricted the other parts tries to compensate for it. This leads to inflammation and pain. This is where osteopathy steps in. It introduces treatment to minimize the pain, to reduce stress and to increase the mobility of the body. For this purpose, osteopaths use a number of hands on and gentle techniques for treatment. These include mobilizing or manipulation of the joints, soft tissue stretches and deep pressure on the joints.

This treatment also has a good effect on sleep. It’s common to experience pain and discomfort when you have bad sleep posture. A good osteopathic treatment is reflected the initial signs of recovery through good sleep. Since the ultimate aim of osteopathy is to support structural stability and mobility, the other parts of the body like the nervous system and circulatory system too benefits from it.

It is believed that osteopathic treatment is not preventative in itself. Also, the osteopaths respect the body’s self regulating technique and interfere when discomfort or pain arises. Since in the hectic and busy lives back pain is a very common issue among people, osteopathy offers great cure for it. Similarly to a chiropractor, an osteopath offers various stretching exercises, lifting exercises and breathing and stress reduction techniques that help a lot. Osteopathic treatment aims for a complete wellness of the body and mind. When alternative treatments are combined with an exercise regime and good dietary habits, it gives a positive outcome without the need of invasive and potentially harmful procedures.