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Asset Swap
What are the purposes of doing asset swap? like buying fixed or zero-c convertible bonds, and doing a swap to receive floating. Thanks a lot
Asset Swap
isolate the equity option component of the cb, you swap out the fixed coupon on the convertible at libor + ASM. which means you have locked in the credit spread of the issuer and also have hedged the int rate risk
Asset Swap
As pickles noted, you can remove interest rate risk on a fixed rate bond you own by paying fixed/receiving floating in an asset swap. This can be particularly useful if the bond in question is illiquid or even non-marketable.