Interest Rate Collar
In a volatile interest rate market, it can be challenging to predict how high or how quickly interest rates will rise, leaving your project with some uncertainty in the budget.
An interest rate collar can be structured so as to limit a company's exposure to interest rate movements while reducing the premium associated with an interest rate cap. As part of the hedging discussion, the interest rate hedging team will work closely with the client to define an interest rate cap and floor which will meet the client's view of interest rates, and appetite to pay a premium.
An interest rate collar specifies a range in which interest rates can move. It protects against the risk of a significant rise in the floating LIBOR rate beyond the pre-agreed cap level, but restricts the benefits of a fall in the floating rate below the pre-agreed floor. Like swaps and caps, the collar can be tailored such that the parameters of the cap match those of the underlying loan.
Graph: The red points indicate the months in which the customer is using the protection of the collar. The blue points show the months where the interest rates are within the parameters of the collar. The orange points show the months where the market rate has fallen below the floor. In these months, the client will pay the floor rate.
Our Interest Rate Risk Management team would be happy to discuss your requirements.
| This Product Profile is for information purposes only, is not intended as an offer or solicitation, nor is it the intention of Anglo Irish Bank Corporation Limited ('the Bank') to create legal relations on the basis of the information contained in it. The Bank expressly advises that it shall not be liable in any way whatever (whether in negligence or otherwise) for any loss or damage suffered from relying on this Product Profile. This Product Profile does not purport to contain all relevant information. No part of this document may be reproduced without the prior permission of the Bank. Anglo Irish Bank Corporation Limited ('the Bank') may have proprietary positions in the products described in this Product Profile. The Bank disclaims any warranty or representation as to the accuracy or reliability of the information and statements in this Product Profile. Anglo Irish Bank Corporation Limited is regulated by the Financial Regulator in Ireland. |