IRS

Interest Rate Swap

Short definition

An interest-rate swap exchanges fixed for floating in the same currency. Principal does not change hands; only the interest difference is paid. It maps a floating loan toward a budgeted fixed cost.

Detailed explanation

The fixed payer is protected against a rate rise. If the swap fix (TLREF, SOFR) does not match the loan fix, basis remains. If tenor and amortisation do not match the loan, the book is over- or under-hedged.

Value moves with the swap curve; when rates fall the fixed payer shows a loss and posts margin. That is the cash face of an economic hedge.

Why it matters for the CFO

When commercial loan rates are high and volatile, an IRS makes the DSCR denominator more predictable. The wrong notional leaves an amortising loan over-hedged.

How it is calculated

Sabit ödeyen ≈ değişken (referans + marj) ile takas; net nakit = (sabit − değişken) × anapara × gün/baz

Net pay is (fixed − realised floating) × notional × day-count. Notional is not exchanged.

Variables in the formula

• Sabit bacak: fixed swap rate
• Değişken bacak: TLREF/SOFR etc. plus margin

How to read it

The fixed swap rate is the market’s price of future short rates, not a forecast of the policy rate.

Definitions are educational. They are not investment, credit or tax advice.