Details of an Interest Rate Swap Contract

An interest rate swap is an exchange of cash flows between two parties where party A pays a fixed rate and receives a floating rate and party B receives a fixed rate and pays the floating rate. An interest rate swap contract has the following characteristics:

Terms	Definition
Maturity	One to 10 years
Effective Date	Depending on market convention, up to five business days from trade date (corporate settlement). The effective date is such that the first fixed and the first floating payment periods are full coupon periods (that is, no long or short first coupons).
Settlement Date	Effective date
All-in-cost	Depends on market convention, but usually semi-annual equivalent of the internal rate of return of the fixed flows versus the floating index flat.
Fixed Payment Fixed Coupon	Current market rate
Payment Frequency	Either semi-annually or annually depending on market convention
Day Count	Based on market convention
Pricing Date	Trade date
Floating Payment Floating Index	Certain money market indices
Spread	None
Determination Source	A publicly quoted source
Payment Frequency	Term of the floating index
Day Count	Based on market convention
Reset Frequency	Term of the floating index
First Coupon	Current market rate of the index
Premium or Discount	None