Gulf Bank > Interest Derivatives

Interest Derivatives

Products	Description
Forward Rate Agreement	FRA is an interest management tool used by corporations with short term debts to lock-in borrowing cost for short periods of time, mainly below 2 years. A company can sell an FRA contract to hedge investments, so the "bid" is used to hedge investments, and the "offer" to hedge borrowings. In a FRA, principal is not exchanged, but only the amount above or below the contracted rate is actually exchanged between the parties.	More information
Interest Rate Options	Ideal solutions for hedging and pure trading One of the most widely used solutions Solutions that are chiefly dedicated to meet varied market conditions	More information
Interest Rate Swap	Corporations using interest rate swaps typically have extensive needs for raising capital. The companies use swap either to reduce interest expense or to manage interest rate exposure. Asset managers use IRS to diversify their investment portfolios and to increase yield on investments. They can purchase fixed rate corporate assets and, by using swaps, convert these assets into a floating rate. No principal is actually exchanged either initially or at the maturity of the contract. Instead, only periodic interest rate differentials are paid between the parties.	More information

Products

Description

FRA is an interest management tool used by corporations with short term debts to lock-in borrowing cost for short periods of time, mainly below 2 years.
A company can sell an FRA contract to hedge investments, so the "bid" is used to hedge investments, and the "offer" to hedge borrowings.
In a FRA, principal is not exchanged, but only the amount above or below the contracted rate is actually exchanged between the parties.

Corporations using interest rate swaps typically have extensive needs for raising capital. The companies use swap either to reduce interest expense or to manage interest rate exposure.
Asset managers use IRS to diversify their investment portfolios and to increase yield on investments. They can purchase fixed rate corporate assets and, by using swaps, convert these assets into a floating rate.
No principal is actually exchanged either initially or at the maturity of the contract. Instead, only periodic interest rate differentials are paid between the parties.

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