Commercial Bank offers a range of supporting products to complement our services in international risk management.
Highlights
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IR swaps
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IR caps
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IR floors
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IR collars
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Commercial Bank offers a wide choice of interest rate management products for borrowers who want to protect their positions against adverse moves in interest rates during the term of their loan.
Interest Rate Swap
This allows users to modify the interest rate index of a liability or asset without changing the characteristics of the underlying debt or asset.
Interest Rate Cap
A contract between two parties, whereby the cap seller agrees to pay the cap buyer, should the interest rate index be above a specific level.
Interest Rate Floor
A contract between two parties, whereby the floor seller pays the floor buyer an interest index fix below a specified level “strike” on specific fixing dates.
The floor seller makes payments to the buyer only for the interest rate periods when the interest rate index is below the strike. The seller pays the buyer the difference between the strike and the interest rate index.
In return for this protection, the buyer pays the seller an upfront premium that is expressed as a percentage of the initial notional amount.
Interest Rate Collar
The buyer of a collar combines the purchase of a cap with the sell of a floor, establishing both a maximum and a minimum interest rate for a floating rate debt. Consequently, the borrower receives payments under the cap if the reference index fixes above the cap strike, but makes payments under the floor if the rate fixes below the floor strike. The sell of a floor allows the borrower to reduce the cost of protection bought with the cap, while still allowing him to benefit from lower floating rates. In some cases, it may be possible to structure a “zero cost” collar.