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Derivatives

  Derivatives   |   Terms
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  • November 11, 2019
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Absolute Rate

The fixed rate in an interest rate swap expressed as a percentage rate instead of a premium or a discount to a specified reference rate. The absolute rate, as a result, is made up of two parts: the reference rate and the premium or discount expressed as a fixed percentage. For example, if the fixed rate of a swap is at a 4% premium or a 1% discount, and the LIBOR rate is 5%, the absolute rate is 9% and 4% respectively.

The absolute rate is also known as an absolute swap yield.


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