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What is a swap? - MoneyWeek Investment Tutorials

5195 ratings | 530387 views
Tim Bennett explains how an interest rate swap works - and the implications for investors. --- MoneyWeek videos are designed to help you become a better investor, and to give you a better understanding of the markets. They’re aimed at both beginners and more experienced investors. In all our videos we explain things in an easy-to-understand way. Some videos are about important ideas and concepts. Others are about investment stories and themes in the news. The emphasis is on clarity and brevity. We don’t want to waste your time with a 20-minute video that could easily be so much shorter.
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Text Comments (430)
Dino17 (10 hours ago)
I has to pause The Big Short film to find out what a swap is, so thanks
Daniel Manumpak (2 days ago)
OMG thank you so much
Harpreet Somal (4 days ago)
How do you know how much the "swaps bank" is willing to accept & give? For example, how was the 8.5% determined & the 8%?
Mohammed Lehlali (5 days ago)
High quality content. Cheers!
Tuyên Phan Đỗ (16 days ago)
Finance is a magic and this teacher is a magician. So much admire.
Sona Hovsepyan (27 days ago)
God bless you !!!
Aman Jain (28 days ago)
Thanks for teaching! You're brilliant!
M Jassar (1 month ago)
thank u
Jayanth Prasad (1 month ago)
if he is lecturer to any college. in his class students will have 200% of attendence
123 456 (1 month ago)
great explanation!!!
doodlerin (1 month ago)
Best teacher :)
Lin Dan (1 month ago)
why not company B borrow to Bank A at 7% fixed in the beginning.
adubbs3 (1 month ago)
bank A offers lower interest rate only to its customer company A because of its credit rating, for example. Company B would receive similar interest rate at Bank A, too. Hedging/Swaps Bank knows information about both companies due to its market intel and profits from this knowledge by bridging this gap in rates.
david alford (1 month ago)
brilliant clear concise explanation. thank you.
Speak Real Democracy (2 months ago)
Excellent . . What is complex swaps
Rohan Kunkalienkar (2 months ago)
Crisp and clear explanation. Thanks Tim
Cai Patrick (2 months ago)
Thank you sir! Your explanation is simple and easy to understand!
Creators Edge (2 months ago)
The best Explanation for swaps. Thank you...........
Santosujit Mohanty (2 months ago)
wow, you cleared my swap concept.
P30 8t (2 months ago)
You reached the heart brother ! 10/10
Vishwanath Pandey (3 months ago)
Excellent explanation. Thank You
Shamrock Alexander (3 months ago)
Fantastic illustration!
sarwar kamal (3 months ago)
even payment @7.5%interest from Company B to swaps bank would have been sufficient to run the swaps deal between coA & coB
Espionage32 (3 months ago)
this was a great explanation. Thank you !
Whats Cooking Lari (4 months ago)
Excellent explanation!
Mike Kipnis (4 months ago)
Interest Rate Swaps - Analytics Online : https://www.opencminc.com
Dott. Fuoriclasse (4 months ago)
Ok, i have a boner now
Chuhan Yang (4 months ago)
Thank you so much! My lecturer spent an hour explaining it and I just don't get it. But you made everything so clear! BTW why 8.5% from company B? How was 8.5% calculated?
Ivalina Passe (4 months ago)
Awesome Explanination
ABHISHEK MEENA (5 months ago)
superb!! expalanation , thanks!
GRASSHOPPER (5 months ago)
Great sir ...this is yesterday of my exam ..💓💓💓💓💓😍
silebon (5 months ago)
I guess the .5% of the swap bank, the .5% of company b and the 1% of company a, make a global benefit of 2% which equals the difference between the 10 and 7% fix rate offered by the banks minus the 1% difference between the variable rates offered of libor minus (libor +1%).
Aishwarya Kochar (5 months ago)
Shouldn't company A be giving Swap Bank 7% because it borrowed at 7% and you said only interests are suppose to be exchanged and nothing else.
worgen warcraft (6 months ago)
Thanks for explaining this in a really clear way, great video!
KloeCoco94169 (6 months ago)
YOU ARE A.M.A.Z.I.N.G. saved my life preparing for the final exam!! this is the BEST explanation EVER!!!
Sagar Pande (7 months ago)
But why doesnot Comapny B Borrow loan from Bank of Company A, as it offers low rate both in Fixed as well as variable ?
Diamond White (7 months ago)
Bravo! So clear, thanks!
Daniel Neustadter (8 months ago)
Wow, amazing.
Zahra (8 months ago)
This really helped me study for my FRM exam tomorrow!
Matt Iles (8 months ago)
Do the banks like this? The original banks or do they not care?
Sunita Ghatak (8 months ago)
Wounderful learning.. Thankyou
Uma Mishra (8 months ago)
It's just awesome. The way he teaches it's just great
Mystery Blog (8 months ago)
Thanku so much! You made it so easier for me... N on the other side you are cute too😄
David Pensyl (9 months ago)
I wish I would've watched this during my Money and Banking Class last semester. It would've saved me a great big headache trying to piece this together off my professors lectures.
A S (9 months ago)
Well done sir.
Xinyu (9 months ago)
Thanks for your teaching video.
DK's Videos (10 months ago)
Thanks for the video. I think you should have also explained the risk involved like what if LIBOR shoots up??
sachin satpute (10 months ago)
what a explanation. If you were my tutor i would have been fucking employee of Berkshire hathway company or do more than that today. Thanks for this.
Shafiq Ahmed (10 months ago)
Why do companies prefer swaps over futures and options
Amin Mdimagh (11 months ago)
bruv u a fucking wizard or smthng damm man u deserve a price for your explanation LEGEND
Dew Time (11 months ago)
This is a great video. I understand the swap bank was able to see the "gap" and take advantage of it. But what I'm trying to figure out is why does this situation exist in the first place? Is it because bank b misjudged the credit worthiness of company b?
gorgborg (11 months ago)
a *swOp* !
MJ_305 (1 year ago)
Why wouldn’t Swaps Bank just disregard Co. A and borrow from Bank A at 7% and lend to Co. B at 9.5%, therefore making 2.5%?
Dustin Suryadi (1 year ago)
If any of you are wondering, Tim makes videos for Killik and Co now. You can check out his great videos at https://www.killik.com/learn/
Vivat_In_Aeternum (1 year ago)
I'm not even a native English speaker and this explanation is the best available on Youtube
Krishna Chittoor (1 year ago)
Awesome Sir, Thank you so much
Yucai Zhang (1 year ago)
bravooooo
Vinit Sharma (1 year ago)
Very Very Cleared explanation of SWAP
PetStuBa (1 year ago)
wonderful !!
Shreya Shimpi (1 year ago)
Thanks a lot !! Your Explanation really cleared my idea of Swap, for a beginner like me. Few questions though : 1. What is Swaps Bank ? 2. What i read and thought that SWAP is a contract between two parties? 3. What if the L.I.B.O.R goes high? Isn't that a loss for Company A ? Thanks!
skinnyDH (1 year ago)
0:51 As I type this on 02/11/2017, it only took the BOE another 6 and a bit years to finally do the rate hike haha.
i dont care what he says, he's british and that's all needed to trust him
Prem Sharma (1 year ago)
Who does swap? Bank or 3rd party. Pls answer
Hemao Wu (1 year ago)
Thank you !!
JA1M1N (1 year ago)
Best and simple explanation. Thanks a lot.
TEGE MP (1 year ago)
Thank You man !
Simon Fehr (1 year ago)
very good explanation! easy to understand! way better than my professor
Ndiga Akech (1 year ago)
question: how does the Swaps bank predict that 8% will be less than the LIBOR (fixed rate) payable by Bank A throughout the Term of the loan? what happens when LIBOR is higher than the 8%? do they renegotiate terms?
Prem Sharma (1 year ago)
Awesome. Thanks.
Xevious (1 year ago)
In my 4 years of business school this is the best display of teaching I have ever seen; this man should be a finance professor making six figures.
Supernova (1 year ago)
Extremely well explained! I kept asking where the original loans were coming from to better understand why the two companies need to enter into a swap agreement. You're video is the only I could find that answers my question. Thank you!
Rishabh Sharma (1 year ago)
This man is a GOD
Nazim Aliyev (1 year ago)
Thank You Very Much! Excellent!
Sanjeev Saju (1 year ago)
His teaching standard is GOLD!
Yashad Ashtaputre (1 year ago)
Explained in a very concise and accurate manner...! Perfectly understood d swaps.. Thank you very much..!
Godfrey Phiri (1 year ago)
thank you very......you have made life easier for me
Seth Wils (1 year ago)
Thank you
Wei Hsuan Huang (1 year ago)
Why cant company A find bank b and company B find bank A?
Just Lou (1 year ago)
This is genius.
Nikhil Balai (1 year ago)
Excellent ! Thank you so much sir!
Nalin Mathur (1 year ago)
No one could have explained it better. The way you teach is amazing. Thank you, sir :)
Shripad Chipade (1 year ago)
Very 1st time i understood about Swaps. Thanks
Philip Erigo-Backsman (1 year ago)
Well done and patiently explained!!
Muhammed CP (1 year ago)
this video making confuses,,plsss explain logically
Lincoln C Mitchell (1 year ago)
good video
Yifan Wei (1 year ago)
Thank you for the well presented explanation :)
Hameed Ahmad (1 year ago)
I 'salute' to those who can understand this branch of knowledge.
Pedro Marques (1 year ago)
Very clear as always! Thank you!
rhine2y6y (1 year ago)
Hmm ok, kind of get it now. Variable usually sucks balls, but for some reason Co A wants it. So Co B can take advantage of the low fixed rate that Co A gets by taking on a variable rate itself.
SIDDHARTH MUDALIAR (1 year ago)
Sir, I just learned the the Interest Swap and taught it to 7 colleagues through class room training. Once again Thanks a lot. I have been assigned a new Project - Canara Bank Derivatives where the implementation is going on. Your understanding way and constructing the sentences wisely helped to understand the concept/functionality.
SIDDHARTH MUDALIAR (1 year ago)
The best Interset SWAP learning VIDEO ever.
Badkuipeend (1 year ago)
Very, very clear explanation. I appreciate the way you rely on much needed pauses. Makes it that much easier to take in the information. Thank you!
Justin Bennet (1 year ago)
why cant they switch banks and cut the middle man out?
Geli Li (1 year ago)
Great video but the sound of chalk down on the whiteboard is killing me lol
Mani Prasanth (1 year ago)
On what basis they are giving LIBOR+1%... Is that a fixed rate to all banks or anything else??
Aisy Rinjanita (1 year ago)
Such a great video. Very simple to understand. Get yourself prepared for the upcoming CFA exam, guys. Good luck!
Yong Wai Pua (1 year ago)
Hi, Very clear explanation. But Im still confused on how to get the 8% and 8.5%.
Le Phuong Vuong Đinh (1 year ago)
Multinational Business Finance 14th, David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett, Pearson education.
Yong Wai Pua (1 year ago)
Thank you so much. Can I know what book you're using? It has a very good explanation.
Le Phuong Vuong Đinh (1 year ago)
Both companies negotiate and agree by themselves or the swap bank/dealer can suggest them as a consultant. That what the book said.
SmartKidLol (1 year ago)
I spent three hours on my lecture notes but i still can't understand the concept of 'swap'. Your video helps me a lot. Thank you!!! :D
Anie Antony (1 year ago)
Sir,could you plz explain how to calculate the rate paid by B if net gain is shared with A?
Really helpful to understand the swaps.
hahaboy21 (1 year ago)
Very informative and easy to understand. Thanks.

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