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Swaps Qu. 5.7

N

nicolathompson

Member
Hi,

I am having trouble understanding the third point in the answer to Qu. 5.7
Why would the company want to make an interest rate swap if it has fixed rate income and fixed rate liabilities? The assets and liabilities are already matched aren't they?
 
I am not sure of thequestion you are refering to. However I think another reason for an IR swap may be that it benefits them financially to do so, so if they are stuck on a hire fixed rate, but short term interest rates are expected to fall, it may benefit to swap to a variable rate.
 
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