## rate

The

**is a particular type of interest rate that pertains to a special type of lending/borrowing contracts called**

*swap rate***, which is represented in Deriscope by the tradable Vanilla IRS.**

*interest rate swap*In an

**one party receives fixed amounts of cash in periodic time intervals from another party and pays to that other party floating amounts linked to the value of a certain ibor rate fixed (announced) at the beginning of the respective interval.**

*interest rate swap*Each fixed amount is determined by the formula

**, where**

*NRτ***is the so called "notional" of the swap - for example 10,000,000 USD -,**

*N***is some preagreed fixed rate - for example 4% or 0.04 - and**

*R***is the length of the respective time interval in annual units - for example 0.5 for a semiannual swap.**

*τ*Note

**is calculated according to some preagreed daycount convention that takes into account issues relating to the varying number of days each month may contain, leap years etc.**

*τ*Each floating amount is given by

**, where**

*NIτ'***is the**

*I***mentioned above and**

*ibor rate***may differ from**

*τ'***if a different daycount convention is employed for the floating leg.**

*τ*In the context of this specific swap,

**is referred to as the respective**

*R***.**

*swap rate*