Day Trading & Forex Forum

jm99

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

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.

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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).

jm99

mrgecko, hows it going old boy.

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

jm99

thanks, already tried the bank

Martinghoul

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

__________________
"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."

arabianights

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

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Only morons take my advice!

Chatroom for STIR traders - open during UK market hours (7am-6pm). Anyone welcome, especially locals, IB/HF traders, brokers (particularly if you have lots of flow ), those with an interest in this field...

MrGecko

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?