Korkosopimus

Korkosopimus, often translated as interest rate swap, is a financial derivative contract where two parties agree to exchange interest rate cash flows. Typically, one party pays a fixed interest rate on a notional principal amount, while the other party pays a variable interest rate, often tied to a benchmark like LIBOR or Euribor. The principal amount itself is not exchanged, hence the term "notional."

The primary purpose of a korkosopimus is to manage interest rate risk. A company that has borrowed money at a variable rate might enter into a korkosopimus to swap its variable payments for fixed payments, thereby hedging against potential increases in interest rates. Conversely, an investor expecting interest rates to fall might swap fixed payments for variable ones.

Korkosopimukset can be customized in terms of maturity, notional principal, and the specific fixed and floating rates involved. They are commonly used by corporations, financial institutions, and governments to achieve specific financial objectives. The valuation of a korkosopimus depends on current and expected future interest rates, as well as the creditworthiness of the counterparties. The market for korkosopimukset is a significant part of the global over-the-counter (OTC) derivatives market.