Capital Markets School - October 2023

Internal Use Only

Primary Uses for IRR Swaps

Loan Hedging • Offered to borrowers • Client Derivative Swaps • Back-to-back or Pooled

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Internal Use Only

Caps/Floors

• An option paid for upfront and pays a floating amount • Can be viewed as a form of insurance policy

One Time Upfront Cap Premium

Cap Buyer

Cap Seller

Periodic Floating Payments (if exercised)

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