Basis Swap

From Open Risk Manual

Definition

Basis Swap. A swap in which payment streams are referenced to different bases

A basis swap can have two legs of the same tenor but different indices, e.g., 3 month LIBOR vs. 3 month TIBOR. The difference in this case is not driven by different interest rate periods but from different markets, i.e., the difference in efficiency between the two markets. The objective is to hedge against basis risk which is the difference in price between two markets. See also forward swap, as a means for controlling interest rate.

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This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with, or correctly interprets, the concepts covered by the FIBO ontology.

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