An Equity swap is a contract by means of which the two parties (the company and the Bank) exchange the profits of a portfolio for interest rates.
If your company has an investment portfolio, by means of an Equity swap you can link the performance of a certain period to interest rates .
At the maturity of each period, the client:
- Receives the stipulated interest rate (EURIBOR 3 months, for example) plus a differential.
- Pays the profits of the portfolio (capital gains plus dividends).
The Equity swap is settled for the difference. The effect of the settlements of the Equity swap for the company consists in neutralising the portfolio's profits by converting it into an interest rate.
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