Accreting Principal Swap

Accreting Principal Swap

A derivative where counterparties exchange financial instrument benefits, involving a growing notional principal amount. An accreting principal swap, is an interest rate or cross-currency swap where the notional principal grows as it reaches maturity. This type of swap may be used in instances where the borrower anticipates the need to draw down funds over a certain period of time but wants to fix the cost of the funds in advance.

Also called accreting swap, accumulation swap, construction loan swap, drawdown swap and step-up swap.

An example of a situation where an accreting principal swap might be sought, is to fix the costs in response to a project's funding requirements. An accreting principal swap is priced by determining the cost of deferring the various trances of the principal along with the legs of the swap itself.

Investment dictionary. . 2012.

Look at other dictionaries:

  • accreting swap — An interest rate swap with an increasing notional amount. American Banker Glossary An interest rate swap in which the notional principal amount increases over time, for example as with a construction loan provided in tranches as each stage of the …   Financial and business terms

  • Amortizing Swap — An exchange of cash flows, one of which pays a fixed rate of interest and one of which pays a floating rate of interest, and both of which are based on a notional principal amount that decreases. In an amortizing swap, the notional principal… …   Investment dictionary

  • Amortising swap — is usually an interest rate swap in which the notional principal for the interest payments declines during the life of the swap, perhaps at a rate tied to the prepayment of a mortgage or to an interest rate benchmark such as the London interbank… …   Wikipedia

  • List of finance topics — Topics in finance include:Fundamental financial concepts* Finance an overview ** Arbitrage ** Capital (economics) ** Capital asset pricing model ** Cash flow ** Cash flow matching ** Debt *** Default *** Consumer debt *** Debt consolidation ***… …   Wikipedia