I spent 4 hours reading a boring text book trying to explain what u did in 8 minutes... FANTASTIC tutorial and explanation.... That probably means you could teach my 6 month module at university in probably 2 days.
it's generally the better rated versus not so better rated companies that reach a swap agreement,hence the interest rate(coupons) disparity as clearly showin in the video by Mr.Khan. ANd we will always have a third party(SWAP maker) who will contractualize everything for the parties. the two parties may not know the other at all. Swap maker will simply make money without zero investments by the spreads that the both parties exchange(commission will always be an element)
Mortgage structures, present value of money, true meaning of buying stock and bond, put options strategy to hedge a long position of stock, interpreting companys financial statements, last but not least the 2008 crisis, among other topics, those really showed me the doors to the finance knowledge which i ve been ignorant and illiterate for many years before. I must add one more is A = L + E. It really makes me reflect, direct my life like a great corporation. I am my own shareholder, what values can i learn from a good coporation that applicable to my life, how to increase my net book value, plan my earnings, what are true assets, acquiring assets vs pure consumptions, etc...
Thanks a TON, SAL! I was totally a noob in finance when I started this 5 weeks ago and now I feel I have a lot of command on finance. You are doing great work. Keep it up! I feel educated :)
Thanks for making all those 196 Videos. When I started watching a month ago, I didn't know anything about finance. 196 videos later and I have a sense of what's going on.
Thank you so much ! after intensive research on interest rate swap, this is the best one explained in a layman term. Extremely grateful for this! Thanks man.
DEC2022 For those watching, play with the numbers that A' ends up with after the IRS. If LIBOR rises, no matter what it rises to, they will still end up paying 80k/period. Fixed Rate. HOWEVER, the other benefit is if LIBOR falls significantly. Say LIBOR falls to 2%. They are paying LIBOR + 2% for a total of 40k to LENDER 1. Yet the IRS entitles them to 30k from B' (Libor + 1%) for a total payout of 10k. Company A' wins by having a fixed rate against higher LIBOR & a lower payout should LIBOR fall. Company B' is taking on the risk. So the higher LIBOR rises, the more they have to payout to company A.
Hi, I have a Finance paper tomorrow. I have no bloody idea about Swaps. I read my textbook chapter twice, spent hours on the slides as well. I watched ur videos 2wc each and everything is so simple and falls into place. Cheers to you Thanks a lot :)
Trust me I have been struggling to understand the dynamics of interest rates swaps through reading textbooks and other lecture videos but yours is just superb. Very explicit. Thank you so much
Sir, if I say u just saved me from nights of tears😢 , sleeplessness 😅, and confusions 😢 regarding this poorly taught topic, is an understatement!!! Thank a million 😢😢
Great video, i only wish you'd touch upon the actuarial side of interest rate swaps also which is very similar except we have to also deal with forward rates and spot rates when determining the swap rate.
Qucik question: Could instead the Lender put an fixed interest rate swap on their lended out bond or asset, like in this video, to decrease their exposure to interest rate risk?
You forgot to say that the payments between Company A & Company B are done on a net basis. So for period 1, instead of Company A having to pay $70K & receive $60K, they just pay the net amount of $10K.
In this example what would be the incentive for A his interest rates went up and stayed up when they would have other wise been relatively low, only B came out on top with lower rates. And if borrower b and borrower a wanted the opposite of what they had, than why didn't they just take out those types of loans from the beginning? Other than that I thoroughly enjoy your videos, they're very educationally coherent, and with economics that is very rare.. Economics should be simple its common sense
The video was helpful to understand the concept of interest rate Swaps... I have one query =7% notional on 1M & Libor + 1% notional on 1 million ... so this will be decided by company A&B while at the time of contract... will it be subjected to change anytime between the contract period if both company agrees?
I dont understand how the interestes payed every period are based on the 1million borowed at the start. Shouldnt the interests change every period as we pay back some of the 1million every period?
seen this concept on a 10 k form they have also mentioned "floating rate ". They purchased high rated fixed taxable municipal bonds w/ interest swaps then they say convert to floating rate yields . what is floating rate yield ? and I thought municipal bonds were tax free ? they are a holding company if that is relevant
Excellent presentation , thank you. Just wanted to know interest rate will be same for both the parties at the inception, fixed rate (7) = libor(6%) + 1% ? And hence nothing is exchanged at the inception ?
Wouldn’t it be easier for A to pay 6% to B, and B to pay LIBOR to A? The result would be exactly the same. B paying LIBOR to A would cancel out the variability introduced by LIBOR to A.
Thank you for putting this up, I appreciate the explanation of credit swaps from a fellow nerd. Now we just need to figure how to get average folks to understand what's actually going on here.
I still don't get it. What is in it for company A? Both companies can never come out better off, one has to pay more than they normally would have directly on their loan in order for the other to pay less.
You are way more competent than some lecturers in chartered accountancy associations. Thanks a mil for saving my time
I spent 4 hours reading a boring text book trying to explain what u did in 8 minutes... FANTASTIC tutorial and explanation....
That probably means you could teach my 6 month module at university in probably 2 days.
it's generally the better rated versus not so better rated companies that reach a swap agreement,hence the interest rate(coupons) disparity as clearly showin in the video by Mr.Khan. ANd we will always have a third party(SWAP maker) who will contractualize everything for the parties. the two parties may not know the other at all. Swap maker will simply make money without zero investments by the spreads that the both parties exchange(commission will always be an element)
Just watched every finance video... I feel educated! Thanks Sal ^^
What'd you learn in specific throughout the entire course?
Mortgage structures, present value of money, true meaning of buying stock and bond, put options strategy to hedge a long position of stock, interpreting companys financial statements, last but not least the 2008 crisis, among other topics, those really showed me the doors to the finance knowledge which i ve been ignorant and illiterate for many years before.
I must add one more is A = L + E. It really makes me reflect, direct my life like a great corporation. I am my own shareholder, what values can i learn from a good coporation that applicable to my life, how to increase my net book value, plan my earnings, what are true assets, acquiring assets vs pure consumptions, etc...
Thanks a TON, SAL! I was totally a noob in finance when I started this 5 weeks ago and now I feel I have a lot of command on finance. You are doing great work. Keep it up! I feel educated :)
Thanks for making all those 196 Videos. When I started watching a month ago, I didn't know anything about finance. 196 videos later and I have a sense of what's going on.
Thank you so much ! after intensive research on interest rate swap, this is the best one explained in a layman term. Extremely grateful for this! Thanks man.
omg, that was so easy to understand after you show the calculation, thanks mate, i alwasy had trouble understanding the interest rate swap
so far this is the best illustration ever!
DEC2022 For those watching, play with the numbers that A' ends up with after the IRS. If LIBOR rises, no matter what it rises to, they will still end up paying 80k/period. Fixed Rate. HOWEVER, the other benefit is if LIBOR falls significantly. Say LIBOR falls to 2%. They are paying LIBOR + 2% for a total of 40k to LENDER 1. Yet the IRS entitles them to 30k from B' (Libor + 1%) for a total payout of 10k. Company A' wins by having a fixed rate against higher LIBOR & a lower payout should LIBOR fall.
Company B' is taking on the risk. So the higher LIBOR rises, the more they have to payout to company A.
I watched most of your financial videos. You always make a complex concept easy to understand. Many thanks!
Hi, I have a Finance paper tomorrow.
I have no bloody idea about Swaps. I read my textbook chapter twice, spent hours on the slides as well.
I watched ur videos 2wc each and everything is so simple and falls into place.
Cheers to you
Thanks a lot :)
Nicely explained.
I wish my finance professor knew how to explain did as good as this video! Thanks!
Thank you very much!!!! this video is excellent to further explain swaps!
Trust me I have been struggling to understand the dynamics of interest rates swaps through reading textbooks and other lecture videos but yours is just superb. Very explicit. Thank you so much
helped me through from HS until university and college time! thanks for your knowledge. 10 years of continuous great dedication from your channel.
Wow that's amazing to study and understand such things while having an engineering background!
Thanks.
Thanks to you I won't fail my Finance exam tomorrow!! Thank you Sir Khan, THANK YOU.
thank you a lot!!! your videos are so easy to follow and understand!!! love them.
Paid $250 for my coaching actuaries exam manual and it nearly did not explain it as clearly and concisely as you did here. Thanks!
Thanks Sal 😊😊
Does the ir swap only happen when the lenders allow them to do so?
Thank you so much Mr Khan!!!!
Thank you. This is amazing !!!
Thank you Sal and Khan Academy
Also just finished this ~200 video playlist lol. Thanks Sal!
Sir, if I say u just saved me from nights of tears😢 , sleeplessness 😅, and confusions 😢 regarding this poorly taught topic, is an understatement!!! Thank a million 😢😢
Thank you so much sir for this instructive video. appreciate it ! Bravo 👏.
Really well explained, thanks
That was perfect!!! 👏👏
huge thanks!
This is excellent! Thanks a ton!
You are a god and a saviour. Thank you!
You're awesome! saved my life literally.. if i flunk out of uni my parents will literally kill me!
wow man, I love your videos, Keep educate us
Ah this is so nice, so im definitely a visual learner
Thank you so much. It was a nice explanation
Literally made Swaps make sense!
you are awesome!! what a clear explanation.. i really appreciate it
Sir, a heartfelt thanks for making this video. It'll be my request to make a video on "currency swap"
Thanks mate:) It was a massive help and now I think about the concept seems to be quite interesting.
finally I understood IRS, thanks I love to watch your video and you have a nice voice :D pozdrawiam!
Simple explanation of a complex topic. Hats off @khan academy
Thanks.. pretty much explanatory
good stuff professor Sal
To the point and a very logical explanation.... Thanks... Keep uploading such videoes
A very satisfying explanation.. thanks a ton 😀😀
you're lowkey my favourite youtuber
finally i finish this playlist thx Sal
you make things simpler .. Thank you 😊
Yeee buddy! Thanks, this makes so much more sense lol if only all profs are as good as you
love how you explained it! anyway do u have vdo on 'ccs'?
Last video in the Khan Academy finance playlist!
Very clear explanation! Thanks!
Thanks
Reminds me of AC and DC signals and how one can be superimposed on the other
thank you! very clear and concise
Please show us credit card reconciliations in quickbooks. Any qb videos?
Crystal clear!!!
Awesome explanation thank you sir
I think B School Profs should start watching these videos to understand how to not over complicate things. Many thanks!
This is pretty clear thanks! My only questions is when they talk about swap rates, what do they refer to?
very helpful! thank you
Thank you
sweet thanx :)
Great video
Thanks Sal!
Great video, i only wish you'd touch upon the actuarial side of interest rate swaps also which is very similar except we have to also deal with forward rates and spot rates when determining the swap rate.
Qucik question:
Could instead the Lender put an fixed interest rate swap on their lended out bond or asset, like in this video, to decrease their exposure to interest rate risk?
I wish our lecturer can teach the concept just as easy as this.
Thanks for the excellent, simple explanation. But the idea that this stuff actually happens is criminal. No wonder our system is all messed up.
Complex yet cool. Wanna try in real life
thanks man!
Thank you for your video. There is one thing I’m missing. Why would a company would accept such a deal ?
thank you big times
thank you captain !!
thanks@!!!
This was helpful, I appreciate 🙏. Okay Sir, in cases where LIBOR is not given, just the variable interest rates are given, how can one go about it?
You forgot to say that the payments between Company A & Company B are done on a net basis. So for period 1, instead of Company A having to pay $70K & receive $60K, they just pay the net amount of $10K.
Amazing. :D
In this example what would be the incentive for A his interest rates went up and stayed up when they would have other wise been relatively low, only B came out on top with lower rates. And if borrower b and borrower a wanted the opposite of what they had, than why didn't they just take out those types of loans from the beginning?
Other than that I thoroughly enjoy your videos, they're very educationally coherent, and with economics that is very rare..
Economics should be simple its common sense
The video was helpful to understand the concept of interest rate Swaps...
I have one query =7% notional on 1M & Libor + 1% notional on 1 million ... so this will be decided by company A&B while at the time of contract... will it be subjected to change anytime between the contract period if both company agrees?
so basically they are betting on the variable rate
Yes A is bullish on LIBOR whereas B is bearish on LIBOR.
Can you make a similar video on currency swap?
How do both companies figure out what interest rate to pay each other in the swap agreement? Thanks.
Most probably both parties decide it amongst themselves
I dont understand how the interestes payed every period are based on the 1million borowed at the start. Shouldnt the interests change every period as we pay back some of the 1million every period?
In fact he’s simply wrong, interest payment are calculated on the debt left to pay, so in P2 information A it would be libor 4% of 930k
Ra Ba in P2 for A*
SAL PLEASE DO RATE LAWS FOR CHEMISTRY!!! PLEASEEEEEEE IM DYING! I CAN'T SEEM TO UNDERSTAND IT AT ALL!!!!
my question is why would company A want to swap if it was getting a better deal ? or is that because they didnt know that at time 0 ?
Who is entering the agreement as the fixed rate payer?
seen this concept on a 10 k form they have also mentioned "floating rate ". They purchased high rated fixed taxable municipal bonds w/ interest swaps then they say convert to floating rate yields . what is floating rate yield ? and I thought municipal bonds were tax free ? they are a holding company if that is relevant
Excellent presentation , thank you. Just wanted to know interest rate will be same for both the parties at the inception, fixed rate (7) = libor(6%) + 1% ? And hence nothing is exchanged at the inception ?
yeah
@falleruen the collateral gets collected..
you. are. GOD!
So Mr Khan all swaps are Forwards contract but not all forwards are swaps please let me know
13 dislikes from other teachers who can't explain lol
Wouldn’t it be easier for A to pay 6% to B, and B to pay LIBOR to A? The result would be exactly the same. B paying LIBOR to A would cancel out the variability introduced by LIBOR to A.
What's tw reason Company change Floating to fix?
Thank you for putting this up, I appreciate the explanation of credit swaps from a fellow nerd. Now we just need to figure how to get average folks to understand what's actually going on here.
I still don't get it. What is in it for company A? Both companies can never come out better off, one has to pay more than they normally would have directly on their loan in order for the other to pay less.