At UAB, our interest rates solutions are designed to offer you the best foreign exchange value, while also making sure they are free of risk. The interest rate risk solutions stated below are meant to give you the most while reducing preventable risk.
Interest Rate Risk Solution
Interest Rate Swaps
An agreement between two parties to exchange fixed to floating rate payment or vice versa in the same currency for a predetermined period and at predetermined intervals on a notional principal amount. No exchange of principal is involved, only interest payments are exchanged
Structured Interest Rate derivative solutions
A tailor-made derivative product to help customers hedge their interest rate requirements.
Cap
An interest rate cap is an arrangement whereby, in return for a premium, the seller (writer) of the cap undertakes an agreed period to compensate the buyer of the cap whenever a reference interest rate (e.g. LIBOR) exceeds the pre-agreed maximum interest rate (cap rate).
Floor
An interest rate floor is an arrangement whereby, in return for a premium, the seller (writer) of the floor undertakes an agreed period to compensate the buyer of the floor whenever a reference interest rate (e.g. LIBOR) falls below the pre-agreed minimum interest rate (floor rate).
Collar
Is a combination of a cap and a floor of identical specifications except for the strike price. A borrower can buy a cap and simultaneously sell a floor to reduce the cost of the hedge.