Interest rate swap

jm99 · Apr 15, 2009, 10:46am

does anyone know where one can enter into a interest rate swap (floating to fixed) for a small retail client (ie loan under 500k gbp)??

Martinghoul · Apr 15, 2009, 10:50am

You can ask your bank... They may or may not agree to do this, but collateral is the big question. RBS used to provide this service to their clients, but, needless to say, their appetite for these activities has somewhat diminished of late.

MrGecko · Apr 15, 2009, 10:56am

Quick thought is to work out the STIR hedge and take opposing positions with a S'better @ the correct BPV (avoids the tricky issue of tax too).

jm99 · Apr 20, 2009, 8:20am

Quote:

Originally Posted by MrGecko

Quick thought is to work out the STIR hedge and take opposing positions with a S'better @ the correct BPV (avoids the tricky issue of tax too).

mrgecko, hows it going old boy.

can you elaborate on the mechanics of this please....not my area of expertise

jm99 · Apr 20, 2009, 8:21am

Quote:

Originally Posted by Martinghoul

You can ask your bank... They may or may not agree to do this, but collateral is the big question. RBS used to provide this service to their clients, but, needless to say, their appetite for these activities has somewhat diminished of late.

thanks, already tried the bank

Martinghoul · Apr 20, 2009, 8:30am

Quote:

Originally Posted by jm99

thanks, already tried the bank

Depending on the maturity (and ccy) of the loan you may be able to do what MrG is suggesting...

arabianights · Apr 20, 2009, 10:18am

Well, there's the complicated, mathematical answer, which you will find in textbooks with nasty things like convexity adjustments, or the arbianights quick n' dirty approximately correct approach: borrow at a floating rate and sell short sterling strip at £2.50 per point each relevant quarterly contract month for every £100k of capital... it's about right

MrGecko · Apr 20, 2009, 11:00am

Not sure you need to worry about convexity anyway, because you w'll be dealing with an SB who might not credit you interest on the margin (and if your term is less than 2 - 3 years, it's not really worth the effort anyway).

Other thing to be wary of is the inception dates - the Short Sterling future has a fixed (quarterly) expiry system, while your FRA (loan) will have a fixed tenure, not expiry (basically this means start the deal on the first day of a new quartely cycle).

What you are trying to do here is replicate the cash flows of the swap with two series of "loans" - a fixed (which you get from the bank) and floating (which is the Short Sterling spread bet). TBH I would do your homework before giving it a go.

Can you shed a little more light on the situation? Are you, say, locked into a floating rate mortgage and you want to fix it at the prevailing market rates?

Apr 15, 2009, 10:46am	#1
jm99 Senior Member Member Since Dec 2004 205 Posts	Interest rate swap does anyone know where one can enter into a interest rate swap (floating to fixed) for a small retail client (ie loan under 500k gbp)??

Apr 15, 2009, 10:50am	#2
Martinghoul Legendary Member Member Since Feb 2009 2,456 Posts	Re: Interest rate swap You can ask your bank... They may or may not agree to do this, but collateral is the big question. RBS used to provide this service to their clients, but, needless to say, their appetite for these activities has somewhat diminished of late. __________________ "Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness."

Apr 15, 2009, 10:56am	#3
MrGecko Banned Member Since Nov 2007 2,822 Posts	Re: Interest rate swap Quick thought is to work out the STIR hedge and take opposing positions with a S'better @ the correct BPV (avoids the tricky issue of tax too).

Apr 20, 2009, 10:18am	#7
arabianights Legendary Member Member Since Jan 2007 6,782 Posts	Re: Interest rate swap Well, there's the complicated, mathematical answer, which you will find in textbooks with nasty things like convexity adjustments, or the arbianights quick n' dirty approximately correct approach: borrow at a floating rate and sell short sterling strip at £2.50 per point each relevant quarterly contract month for every £100k of capital... it's about right __________________ World's leading STIRs chatroom - www.propboards.com - register, then click on chat. Don't let the lack of posts on the forum put you off - the action happens in the chatroom. Targeted at locals, but hedge funds, brokers (including IDBs), market makers, and a few sizable amateurs are all represented. When it's quiet, banter is encouraged and anything goes. No nuisance spread betters please. Anyone else welcome.

Apr 20, 2009, 11:00am	#8
MrGecko Banned Member Since Nov 2007 2,822 Posts	Re: Interest rate swap Not sure you need to worry about convexity anyway, because you w'll be dealing with an SB who might not credit you interest on the margin (and if your term is less than 2 - 3 years, it's not really worth the effort anyway). Other thing to be wary of is the inception dates - the Short Sterling future has a fixed (quarterly) expiry system, while your FRA (loan) will have a fixed tenure, not expiry (basically this means start the deal on the first day of a new quartely cycle). What you are trying to do here is replicate the cash flows of the swap with two series of "loans" - a fixed (which you get from the bank) and floating (which is the Short Sterling spread bet). TBH I would do your homework before giving it a go. Can you shed a little more light on the situation? Are you, say, locked into a floating rate mortgage and you want to fix it at the prevailing market rates?

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