Deriscope ## The Excel Derivatives Periscope

##### Coverage

swap__rate

The *swap rate* is a particular type of interest rate that pertains to a special type of lending/borrowing contracts called *interest rate swap*, which is represented in Deriscope by the tradable Vanilla IRS.

In an *interest rate swap* 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.

Each fixed amount is determined by the formula *NRτ*, where *N* is the so called "notional" of the swap - for example 10,000,000 USD -, *R* is some preagreed fixed rate - for example 4% or 0.04 - and *τ* is the length of the respective time interval in annual units - for example 0.5 for a semiannual swap.

Note *τ* 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.

Each floating amount is given by *NIτ'*, where *I* is the *ibor rate* mentioned above and *τ'* may differ from *τ* if a different daycount convention is employed for the floating leg.

In the context of this specific swap, *R* is referred to as the respective *swap rate*.