INTEREST RATE SWAP -DERIVATIVE INSTRUMENT

3rd august 2010 : ECONOMIC TIMES

INTEREST
RATE SWAP
What is an interest rate swap?
An interest rate swap is an over-the-counter (OTC) derivative instrument available in the currency market where counter parties can exchange a floating payment for a fixed payment and vice-versa related to an interest rate. Financial institutions going for foreign borrowings usually buy interest rate swaps to hedge their interest rate exposure due to fluctuating interest rates.
These were originally created to allow multinational companies to evade exchange controls. Today, they are used to hedge against or speculate on changes in interest rates.
Interest rate swaps are also used speculatively by hedge funds or other investors who expect a change in interest rates or the relationships between them. Traditionally, fixed income investors who expected rates to fall would purchase cash bonds, whose value increased as rates fell. Today, investors with a similar view could enter a floatingfor-fixed interest rate swap; as rates fall, investors would pay a lower floating rate in exchange for the same fixed rate.
How does it work?
In an interest rate swap, each counter party agrees to pay either a fixed or floating rate denominated in a particular currency to the other counter party. The fixed or floating rate is multiplied by a notional principal amount (say, $1 million). This notional amount is generally not exchanged between counter parties, but is used only for calculating the size of cash flows to be exchanged.
The most common interest rate swap is one where one counter party A pays a fixed rate (the swap rate) to counter party B while receiving a floating rate (usually pegged to a reference rate such as LIBOR — London Inter Bank Offered Rate).
A pays fixed rate to B (A receives floating rate)
B pays floating rate to A (B receives fixed rate).
Consider the following swap in which Party A agrees to pay Party B periodic fixed interest rate payments of 3.784%, in exchange for periodic floating interest rate payments of LIBOR + 70 bps (0.70%). There is no exchange of the principal amount and that the interest rates are on a notional principal amount. The interest payments are settled in net. The fixed rate (3.784% in this example) is referred to as the swap rate.
What are the different types of swaps?
Being OTC instruments, interest rate swaps can come in a huge number of varieties and can be structured to meet the specific needs of the counter parties. By far the most common are fixed-for-floating, fixedfor-fixed or floating-for-floating. The legs of the swap can be in the same currency or in different currencies. The above example is a specimen of fixed-for-floating swap. Fixed-for-fixed works the same way except that there is no change in the rate used during the date of payment, as does floating-for-floating swap.

sssssshhhhhhh...

1.Pick out a scar you have, and explain how you got it?

I was 8 when i picked up this big scar on my left knee. Me and my friends used to race on our cycles. It was during this one race, while i was taking a sharp left turn, my bicycle just skidded off the road. i got deep cuts in my left knee, ankle and both my arms. I had to bunk school for about a week or so.

2. What is on the walls in your room?

Paint, wall clock and a wwf calendar showing Indian wild animals(presently a tiger).

3. What does your phone look like?

Nokia N70












It has 2MP camera, 1 Gb memory card, Bluetooth enabled, 3-G enabled aur bahut kuch


4. What music do you listen to?

Basically Anything that sounds right.



5. What is your current desktop picture?

6. What do you want more than anything right now?

Cant say (he he)

7. Do you believe in gay marriage?

ya, what can we do if they can't enjoy women.

8. What are you listening to?

lamha yeh jayega kaha from dil dosti etc

9. What's something people may not know about you?

i am a complete psycho(hehe)

10. Do you smoke?

i have smoked about 7 cigarettes in the past one year. so I like to believe that i am not a smoker


11. What kind of hair/eye color do you like on the opposite sex?

black

12. Are you too shy to ask someone out?

yup big problem.

13. Did you tell ur family about the blog?

No

14. If you could eat anything right now, what would it be?

Hyderabadi Biryani(especially the one u get in the Paradise restaurant in Hyderabad, that's the best) if you visit hyderabad make sure u visit Paradise Restaurant

15. Is anyone in love with you?

i Don't think i am good looking for someone to love me

Jugad Just do it!!!!

We pack in double the capacity of vehicles on our roads but we still make it to our offices on time.

The Indian railways makes the Mumbai Local train operational within 15 hrs after Mumbai blasts whereas in England it took 48 hrs after the 7/7 blasts

The Indian Soldiers man our borders in the extreme weather inspite of the scarcity of resources

Indian Engineers have been mavericks at the art of Jugad. They have changed the entire outlook of the western world towards India.

Our country with all its differences has stayed one

These are just some of the examples that i have quoted to bring to your notice about Jugad. Part of the reason why we are capable of doing these extraordinary things is the highly competitive environment in which we are brought up. We are made to learn at a very young age to somehow adapt to our surrounding & fight it out(Jugad). The words that i could relate to Jugad are alternative arrangement(innovate), source, approach, and i think there might be more words in which each person associates with Jugad. For me Jugad is born out of the culture of scarcity of resources & survival and if we look closely at our surroundings we would find this art at work.

tell me what u think about Jugad just click on the link below

Book review : ICon Steve Jobs

iCon: Steve Jobs
The Greatest second Act in the history of business
Authors: Jeffrey S.Young
William L.Simon
Steve Jobs an adopted child pairs up with the brilliant Steve Woznaik to create the popular personal computer, the APPLE II. The pair become multimillionaires overnight. Jobs subsequently goes on to develop Machintosh. But due to his autocratic style of working and frequent clashes with the executives, he is forced out of the company.

Steve Jobs starts a company called Next, a software company. This company was also a near disaster when Steve Jobs buys Pixar, the animation company started by George Lucas, the creator of Star Wars. Soon, Pixar along with Disney produce blockbusters like Toy Story, Finding Nemo. Pixar acts a face saver for Steve Jobs. He becomes a billionaire after Pixar went public.

At the same time, Apple was struggling and the new CEO Gill Amelio, was trying hard to change the fortune of the Apple by cutting costs, consolidating products. His search for a operating system takes him to Steve Jobs. Gill Amelio buys the company Next giving Steve Jobs a share in Apple and also a position of R&D head. Steve Jobs starts playing the boardroom politics which leads to the ouster of Gill Amelio. Steve Jobs takes over the company reins. Soon Apple unleashes its new product line of computers which results into revenue and profit for Apple. Apple hits Jackpot with its entry into the music industry. Apple's trump card the Ipod forms a major chunk of revenue for Apple.

The authors have given a full picture of Steve Jobs. It provides insights into the personal and the professional life of Steve Jobs and also the company Apple. In the first half of the book the authors have wrote about the shortcomings of Apple chief and in the second half they have shown him as a genius. I found the book quite captivating. As far as Steve Jobs is concerned i neither liked him nor hated him.

Hey Ram

Valmiki wouldn't have foreseen that his Ramayana would have such a huge impact on the Indian Politicians. With elections round the corner once again Lord Ram has resurfaced on the political scenario. In Ramayana Lord Ram comes back after 14 years, these days he comes back every 4-5 yrs. This time he has come back in the form of ram setu.
i dont know what the UPA governemt was thinking when the ASI produced a controversial study on the Ram Sethu. In a country which is obsessed with idol worship this was bound to affect the people of India and more importantly the BJP. BJP obseession with Ram is quite well known, be it the Babri Majid or the theory of Ram Rajya.
Between all this Tamil Nadu CM comes up with his own views on Ram adding fuel to the fire. And so once again Lord Ram captures the limelight of the Indian politics.
Sadly, BJP having not learned from it's past mistakes, is bound to make this issue an important one against the government. Like in the 2004 general elections, the BJP leaders are going to take out rath yatras from one part of the country to the other with its hindutva or ram rajya agenda.
India with its wide array of problems is ignored and the election is fought on the issues of religion and not on the development side.

Dr. A. P. J. Abdul Kalam 's Speech

Dr. A. P. J. Abdul Kalam 's Speech in Hyderabad ॥
Why is the media here so negative?
Why are we in India so embarrassed to recognize our own strengths, our achievements? We are such a great nation। We have so many amazing success stories but we refuse to acknowledge them.Why?
We are the first in milk production. We are number one in Remote sensing satellites. We are the second largest producer of wheat. We are the second largest producer of rice.
Look at Dr. Sudarshan , he has transferred the tribal village into a self-sustaining, self-driving unit. There are millions of such achievements but our media is only obsessed in the bad news and failures and disasters. I was in Tel Aviv once and I was reading the Israeli newspaper. It was the day after a lot of attacks and bombardments and deaths had taken place. The Hamas had struck. But the front page of the newspaper had the picture of a Jewish gentleman who in five years had transformed his desert into an orchid and a granary. It was this inspiring picture that everyone woke up to. The gory details of killings, bombardments, deaths, were inside in the newspaper, buried among other news. In India we only read about death, sickness, terrorism, crime. Why are we so NEGATIVE? Another question: Why are we, as a nation so obsessed with foreign things? We want foreign T. Vs, we want foreign shirts. We want foreign technology. Why this obsession with everything imported. Do we not realize that self-respect comes with self-reliance? I was in Hyderabad giving this lecture, when a 14 year old girl asked me for my autograph. I asked her what her goal in life is. She replied: I want to live in a developed India .. For her, you and I will have to build this developed India .. You must proclaim. India is not an under-developed nation; it is a highly developed nation. Do you have 10 minutes? Allow me to come back with a vengeance. Got 10 minutes for your country? If yes, then read; otherwise, choice is yours.
YOU say that our government is inefficient. YOU say that our laws are too old. YOU say that the municipality does not pick up the garbage. YOU say that the phones don't work, the railways are a joke, The airline is the worst in the world, mails never reach their destination. YOU say that our country has been fed to the dogs and is the absolute pits. YOU say, say and say. What do YOU do about it? Take a person on his way to Singapore .. Give him a name - YOURS. Give him a face - YOURS. YOU walk out of the airport and you are at your International best. In Singapore you don't throw cigarette butts on the roads or eat in the stores. YOU are as proud of their Underground links as they are. You pay $5 (approx. Rs. 60) to drive through Orchard Road (equivalent of Mahim Causeway or Pedder Road) between 5 PM and 8 PM. YOU come back to the parking lot to punch your parking ticket if you have over stayed in a restaurant or a shopping mall irrespective of your status identity... In Singapore you don't say anything, DO YOU? YOU wouldn't dare to eat in public during Ramadan, in Dubai . YOU would not dare to go out without your head covered in Jeddah. YOU would not dare to buy an employee of the telephone exchange in London at 10 pounds ( Rs.650) a month to, 'see to it that my STD and ISD calls are billed to someone else.'YOU would not dare to speed beyond 55 mph (88 km/h) in Washington and then tell the traffic cop, 'Jaanta hai main kaun hoon (Do you know who I am?). I am so and so's son. Take your two bucks and get lost.' YOU wouldn't chuck an empty coconut shell anywhere other than the garbage pail on the beaches in Australia and New Zealand . Why don't YOU spit Paan on the streets of Tokyo ? Why don't YOU use examination jockeys or buy fake certificates in Boston ??? We are still talking of the same YOU. YOU who can respect and conform to a foreign system in other countries but cannot in your own. You who will throw papers and cigarettes on the road the moment you touch Indian ground. If you can be an involved and appreciative citizen in an alien country, why cannot you be the same here in India ? Once in an interview, the famous Ex-municipal commissioner of Bombay , Mr. Tinaikar , had a point to make. 'Rich people's dogs are walked on the streets to leave their affluent droppings all over the place,' he said. 'And then the same people turn around to criticize and blame the authorities for inefficiency and dirty pavements. What do they expect the officers to do? Go down with a broom every time their dog feels the pressure in his bowels? In America every dog owner has to clean up after his pet has done the job. Same in Japan . Will the Indian citizen do that here?' He's right. We go to the polls to choose a government and after that forfeit all responsibility. We sit back wanting to be pampered and expect the government to do everything for us whilst our contribution is totally negative. We expect the government to clean up but we are not going to stop chucking garbage all over the place nor are we going to stop to pick a up a stray piece of paper and throw it in the bin. We expect the railways to provide clean bathrooms but we are not going to learn the proper use of bathrooms. We want Indian Airlines and Air India to provide the best of food and toiletries but we are not going to stop pilfering at the least opportunity. This applies even to the staff who is known not to pass on the service to the public. When it comes to burning social issues like those related to women, dowry, girl child! and others, we make loud drawing room protestations and continue to do the reverse at home. Our excuse? 'It's the whole system which has to change, how will it matter if I alone forego my sons' rights to a dowry.' So who's going to change the system? What does a system consist of ? Very conveniently for us it consists of our neighbours, other households, other cities, other communities and the government. But definitely not me and YOU. When it comes to us actually making a positive contribution to the system we lock ourselves along with our families into a safe cocoon and look into the distance at countries far away and wait for a Mr.Clean to come along & work miracles for us with a majestic sweep of his hand or we leave the country and run away. Like lazy cowards hounded by our fears we run to America to bask in their glory and praise their system. When New York becomes insecure we run to England .. When England experiences unemployment, we take the next flight out to the Gulf. When the Gulf is war struck, we demand to be rescued and brought home by the Indian government. Everybody is out to abuse the country. Nobody thinks of feeding the system. Our conscience is mortgaged to money. Dear Indians, The article is highly thought inductive, calls for a great deal of introspection and pricks one's conscience too.... I am echoing J. F. Kennedy 's words to his fellow Americans to relate to Indians..... 'ASK WHAT WE CAN DO FOR INDIA AND DO WHAT HAS TO BE DONE TO MAKE INDIA WHAT AMERICA AND OTHER WESTERN COUNTRIES ARE TODAY' Lets do what India needs from us. Thank you, Dr. Abdul Kalaam

Ebooks

I have uploaded some of my favourite books in the link below

Fiction

Angels and demons by dan brown

Not a penny more not a penny less by jeffrey archer

Harry potter and the deathly hallows by J.K.Rowling

	Fiction books
	Click here Hosted by eSnips

Non Fiction

Its not about the bike by lance armstrong(must read)

Every second counts by lance armstrong

Made in america by sam walton

The world is flat by Thomas Friedman

Shantaram by David Gregory Roberts

Rich Dad Poor Dad by Robert Kiyoski

	Non fiction, Autobiographies
	Click here Hosted by eSnips

www.esnips.com/user/passionfire999