Delayed Rate Setting Swap

Delayed Rate Setting Swap

An exchange of cash flows, one of which is based on a fixed interest rate and one of which is based on a floating interest rate, in which the spread (difference) between the fixed and floating interest rates is determined when the swap is initiated but the actual interest rate is not determined until later. The swap contract will define the amount of time the investor has to lock the swap's fixed interest rate.

A delayed rate setting swap is also called a "deferred rate setting swap" or "spread lock". This type of interest-rate swap might be desirable if the investor expects interest rates to change in its favor in the near future but likes the spread currently available. Once the fixed interest rate has been set, a delayed rate setting swap acts like a regular interest rate swap.


Investment dictionary. . 2012.

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