Interest Rate Swap
An Interest Rate Swap is an interest rate derivative contracted between two parties. The most common form of Interest Rate Swap is fixed for floating, whereby one party makes fixed interest payments to the other and receives back payments based on a Benchmark Rate. Interest Rate Swaps are often sold alongside Standard Business Loans, sometimes as a condition of lending. The combination of the Interest Rate Swap and the Standard Business Loan creates a fixed rate obligation of the borrower. Interest Rate Swaps impose Contingent Liabilities on borrowers by exposing them to Market Break Costs.