Absolute-Rate Swap
Definition
A type of interest rate exchange between two parties where the fixed rate being swapped is stated as a clear percentage, not tied to any benchmark.
Example
Example 1:
Two Nigerian companies agree to swap interest payments, one pays a fixed 13% while the other pays a floating rate, that fixed 13% stated as a straight figure makes it an absolute-rate swap.
Example 2:
A US corporation and a bank in New York agree to an interest rate swap where the company pays a fixed 5.75% in exchange for receiving a floating rate, the fixed side expressed as a standalone percentage makes it an absolute-rate swap.