Business, Legal & Accounting Glossary
Trade of interest rates from different money markets to eliminate interest-rate risk. For example, if a financial institution lends money with a variable rate based on the London Interbank Offer (LIBOR) rate, and borrowers receive the Treasury Bill interest rate, the difference between the interest rates is a risk. If the lender swaps interest rates with the borrower in a Basis Rate Swap, interest-rate risk is removed.
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This glossary post was last updated: 20th November, 2021 | 0 Views.