About Interest Rate Swaps

Hi guys!

As I’m sure many of you will know, it is exam period for many uni’s. I was revising with my flat mate who is on a different course and was reading through his notes just out of boredom. I’m glad I’m not on his course because it seems so complex. Feeling a bit dumb for not knowing what an interest rate swap is, I went away to look it up and here’s what I found.

An interest rate swap is an otc clearing instrument. It mainly depicts two parties agreeing to exchange specific interest rate cash flows, generally based on a specific notational amount. That notational amount usually varies from a fixed rate to a floating rate; it also varies from one floating rate to another one.

How people apply interest rate swaps

Most parties use interest rate swaps for speculation and hedging within the financial market. The most common scenario where parties utilize interest rate swaps involves, naturally, mortgages.

The scenario starts with a person who has a fixed rate mortgage. If their neighbour or another interested party has a floating rate mortgage, you might want to swap rate with your neighbour for various reasons, usually economic reasons. This especially works if your neighbour wants to have a fixed rate instead.

Instead of swapping each other mortgage, as they say, they instead make a mutual agreement to pay each other’s’ swap rate. The first party (you) would pay your neighbour’s fixed rate, while your neighbour pays the floating rate, usually indexed to what’s known as a LIBOR rate.

Both parties are still responsible for paying the original mortgage payments on their houses, but they’re also responsible for exchanging the difference between the rates (in cash). The agreement is essentially supposed to swap rates between both parties, hence the name interest rate swaps.

Why people use interest rate swaps

Interest rate swaps are more common than most people assume. They’re a necessary transaction for parties who want to swap mortgage rates with one another. Instead of having to completely restructure their mortgages, swapping their interest rate instead affords them a better mortgage rate.

Interest rate swaps are pretty common to the financial market, mainly due to the aforementioned reason. There are several reasons why people utilize interest rate swaps in the first place, besides just mortgage.

Some fixed rate income investors might expect their interest rates to fall. Instead of restructuring their investment, they choose to swap rate with another party (buying a floating-for-fixed swap rate) to pay a lower (floating rate) in exchange for their old rate.

People with hedge funds also utilize interest rate swaps to capitalize on different financial opportunities, usually arbitrage opportunities tied in the corporate credit market. Interest rate swaps and otc derivatives clearing are utilized around the world, from the standard clearing house to the biggest financial institutions.

For a better explanation of what it is, feel free to watch the video below :)

Yoga and Chiropractic: A Mind, Body and Soul Experience

My experience of gyms and sports clubs is that they are very male oriented places where I felt out of place. So I looked into the health benefits of yoga and decided to take up a class and I am loving it despite having to visit a chiropodist for a yoga-related foot injury.

Yoga has become an integrated lifestyle structure for individuals who, like myself, seek fitness, health and spiritual connections.

Physically yoga improves flexibility, core strength, endurance and stability. It also has been proven to naturally lower blood pressure and is a natural stress-reliever. Perhaps the best use of yoga is for it’s powerful effects on the mind. Yoga teaches you breathing and postural techniques that free your mind of negative thoughts, unnecessary fears, and unproductive habits by forcing you to become more aware of yourself and your surroundings.

Through yoga you are tuning your body’s musculoskeletal body and nervous system and that is the foundation of chiropractic care. In yoga the primary focus is on aligning your mental and spiritual outlooks but chiropractic care can help align your physical body to fully appreciate the power of the two holistic medical approaches.

Furthermore, rather you are novice or expert to yoga; there are potential injury risks. This can happen to those who are new to yoga and have been using the wrong techniques or movements in certain positions. On the other hand, sometimes, even the seasoned yogi can get out of alignment and need a visit to a chiropractor can guarantee that you are aligned rather than hurting an existing misalignment.

According to a physiotherapist I know, the three most common yoga injuries are:

  • Neck strain: Postures such as ‘The Plow’ can cause increased pressure on your vertebrae and neck muscles.
  • Yoga butt: This pelvic misalignment can be caused by repetitions of ‘Sun Salutations’ and ‘Ashtanga’.  This can cause the hamstring to become inflamed or tear if the misalignments are not treated.
  • Hips flex strain: This is common for those who focus on core yoga postures. Pain at the front of the hip can be a sign of an underlying imbalance because you’ve used the hip flexor muscles rather than your core muscles.

You should pay attention to your body and do not take any pain or burning sensations in your ligaments and muscles as ‘yoga working’. It’s important that your body is aligned physically so that you can reap the benefits of yoga.

Both chiropractic care and yoga are on-going process that require your commitment to the education as well as the physical process of both holistic medical approaches. While you might be able to achieve benefits by doing yoga a few times or fix an ailment by visiting an osteopath once or twice – the true healing power is in the long-term plan.

Your age is determined by your flexibility, stability, mobility and state of mind. By combining chiropractic and yoga, you can remain as physically young as your soul.