Interest rate hedging products are financial contracts between a customer and institution that take the form of swaps, caps, or collars to limit interest rate risk. A swap exchanges one type of interest payment for another like fixed for floating. A cap places a ceiling limiting how high rates can rise. A collar limits rates within a range by having both ceiling and floor limits.

1. Interest Rate Hedging Products Explained by:

2. What are Interest Rate Hedging Products
?

3. Interest Rate Hedging Products
Interest Rate Hedging Products are financial contracts
between a customer and a financial institution and usually
take the form of either a Swap, Cap or Collar.

4. What is a Swap
?

5. Interest Rate Swaps
A Swap is an agreement between two parties in which one
type of interest payment is swapped for another.
E.g. Swapping a fixed rate payment for
a floating payment.

6. What is a Cap
?

7. Caps
A Cap places a limit or ceiling on any interest rate rises.
Interest rates cannot rise above a
certain level

8. What is a Collar
?

9. Collar
A Collar enables the customer to limit interest rates to
within a simple range.
In this case there will be both ceiling
and Floor Limits

10. For more information on Interest Rate
Hedging Products visit:
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