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Interest rate swaps are financial contracts between two parties who agree to exchange interest rate payments based on a notional principal amount over a predetermined period. In an interest rate swap, one party agrees to pay a fixed interest rate on a notional amount, while the other party agrees to pay a floating interest rate on the same amount. Interest rate swaps are used in the bond, derivatives, and forex markets.
Traders and investors can use interest rate swaps to manage interest rate risk, reduce financing costs on investments, or speculate on interest rate changes. These contracts can be customised as they are traded over the counter, so both parties can agree on the terms and conditions that best fit their needs.
Companies and individual investors can manage interest rate risk with interest rate swaps. For example, an investor that has borrowed money at a variable interest rate predicts that interest rates will rise in the near future. This means that their borrowing costs will increase.
To manage this risk, the investor can enter into an interest rate swap with a counterparty who has borrowed money at a fixed interest rate. With the contract, the investor can convert their variable rate loan into a fixed rate loan. This can provide certainty around their borrowing costs regardless of whether interest rates really do increase in the near future.
ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC – S.P.C (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates under First Category: Dealing in Securities and Fifth category: Arrangement and advice (Introduction). ADSS is a Limited Liability Company – Sole Proprietorship Company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
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