Swap on inflation
Swap on inflation
A swap on inflation is a contract by means of which two parties (your company and the bank) exchange some variable flows (inflation) for other fixed flows.
It will be useful if your company pays o receives incomes linked to inflation.
1. Payer
If your company pays incomes linked to inflation, by means of a swap on inflation you can fix its growth for a determined term.
upon maturity of each period:
- Receives the stipulated inflation rate (Spanish inflation in twelve-month rate, for example).
- Pays a stipulated fixed rate at the start of the contract.
The swap on inflation is settled by offset. The effect of the settlements of the swap on inflation for your company consists of neutralizing the variation in your perceived incomes due to inflation.
2. Recipient
If your company pays incomes linked to inflation, by means of a swap on inflation you can fix its growth for a determined term.
upon maturity of every period, the client:
- Pays the stipulated inflation rate (Spanish inflation in twelve-month rate, for example).
- Receives a stipulated fixed rate at the start of the contract.
The swap on inflation is settled by offset. The effect of the settlements of the swap on inflation for your company consists of neutralizing the variation in your perceived incomes due to inflation.
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