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Interest Rates and Derivatives

Interest Rates and
Derivatives

Interest Rates and Derivatives

Get Interest Rates and Derivatives

The function of Interest Rates and Derivatives desk (IRD) is market making in derivatives products for proprietary trading. The desk also caters to providing hedging solutions to corporate for its balance sheet and currency exposure.

Overnight Index Swaps (OIS)

  • Overnight Interest rate swaps are rupee swaps where the floating rate is benchmarked to the overnight NSE MIBOR Rate.
  • These swaps are widely used by Banks and Corporates to hedge the interest rate risks. The users may undertake these swaps for shifting its liability from fixed rate to floating rate (or vice verse)
  • Users : Mutual Funds, PDs, Banks, Corporates with rate exposure

Indian Benchmark Swaps (INBMK)

  • INBMK swaps are rupee swaps where the floating rate is benchmarked to the 1 Year INBMK Rate.
  • These swaps are used by Banks and Corporates to hedge the interest rate risks arising from government securities. The users may undertake these swaps for shifting its liability from fixed rate to floating rate (or vice verse)
  • Users : PDs, Banks, Corporates with G sec rate exposure.

Currency Swaps

  • Currency Swaps are swaps wherein Corporates shifts its interest or principal (or both) liability from one currency to other. The utility of undertaking these structures comes from cost advantage or hedging rational.
  • Users : Corporates with Rupee (or foreign currency) loan

Long Tenor Forwards (LTFX)

  • Long Term Forward Contracts are forward contract for longer duration; with tenor more than one year. USD INR Forward with tenor less than one year are readily quoted in the market while forwards for longer tenor are derived from its constituents swaps and shorter tenor forwards
  • Users : Exporters, Importers, Corporates with foreign currency balance sheet exposure

Currency Options

  • Currency Options are instruments which give Corporates right to buy (or sell) a currency at a particular rate and a particular rate. As against a forward there is only right and no obligation on buyer and hence there is a cost involved in plain vanilla options.
  • Users : Exporters, Importers, Corporates with currency risk in balance sheet

Foreign Currency Interest Swaps and Collars

  • These instruments are used for hedging floating Libor exposure in foreign currency loan or ECB
  • Users : Corporates with Libor denominated foreign currency loan

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