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CIRS (CROSS INTEREST RATE SWAP) |
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  | Cross Interest Rate Swap is intended for: |
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legal entities especially
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| Cross Interest Rate Swap characteristics: |
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Cross Interest Rate Swap (CIRS) is an agreement about the exchange of two currencies and the interest costs related to these. Party A undertakes to purchase money in currency 1 from party B for a certain amount of money in currency 2, as of the firmly-set date and at the same time, it undertakes a reverse sale of the same amount of money in currency 1 for a certain amount of money in currency 2 in the same exchange rate and as of the firmly-set later date. Within the deal's duration, the parts mutually pay the interests of the currencies which they purchased at the beginning of the deal from each other.
Two working days before the start of the interest period, the floating rate gets fixed and also a comparison with the fixed rate is done (this relates to fixed-to-float CIRS) or both floating rates get fixed (float-to-float CIRS). At the end of the interest period, the settlement is carried out by one cash flow. The party, the swap interest payment of which is higher, settles the difference of the mutually-exchanged interest payments.
During the business duration of a Cross Interest Rate Swap, the parties may agree upon its cancellation. Upon the cancellation, the market value of the interest rate swap is being balanced by a lump sum payment, followed by a cancellation of the whole transaction and of all future obligations. The payments of interests carried out before the date of swap cancellation are not returned. As of the date of concluding the Cross Interest Rate Swap, the involved parties agree upon the price for which they are both willing to withdraw from the transaction. The party, which is in an unfavourable (loss) position, pays to the other party an agreed-upon sum (swap market price) as of the date of the spot foreign currency and the swap deal is cancelled. If the swap was not cancelled as of the date of the interest payments_ settlement, the due difference of the so-far accounted costs´ and revenues´ interests of the cancelled swap is a part of the swap market price.
The deal is always concluded per telephone with the dealer of Treasury Department, who sends a confirmation of the concluded deal with the parameters of the transaction to the client.
Cross Interest Rate Swap is of two types:
- Amortised-down CIRS - a nominal value on the basis of which the interests are being calculated, is within the contract's duration reduced by a pre-set way; two ways of security settlement are possible: actual settlement of the security and depreciation of the basis used for interests and reverse exchange of the entire securities,
- Amortised-up (step-up) CIRS - a nominal value on the basis of which the interests are being calculated, is within the contract's duration increased by a pre-set way; also both the above given ways of security settlement are possible.
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| Cross Interest Rate Swap benefits: |
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- an interest and currency risk hedging tool
- the obtaining of capital in the required (purchased) currency, in the necessary volume and with the required due term (reverse sale)
- the deal is concluded by telephone
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| Cross Interest Rate Swap allows you to: |
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Hedge both currency and interest risks.
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| How to obtain Cross Interest Rate Swap? |
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You can ask for this product / service at any KB Bratislava business center. For further information about this product/service, please contact your Relationship manager or write to us to our e-mail address koba@koba.sk.
