tag:blogger.com,1999:blog-21846828.post7313116183943628876..comments2024-01-14T16:01:08.962-08:00Comments on The Rational Realist: Mind NumbingRational Realisthttp://www.blogger.com/profile/08886526093283532105noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-21846828.post-79992349797706316062014-05-06T23:12:24.050-07:002014-05-06T23:12:24.050-07:00I don't fully know how the swaps work, and unf...I don't fully know how the swaps work, and unfortunately I don't think many borrowers buying this protection do either. Bankers sure know how they work.Rational Realisthttps://www.blogger.com/profile/08886526093283532105noreply@blogger.comtag:blogger.com,1999:blog-21846828.post-40599132803723140152014-05-06T08:35:31.827-07:002014-05-06T08:35:31.827-07:00Any idea how these rate swaps work for the borrowe...Any idea how these rate swaps work for the borrower? "When rates fall ... might pay higher costs ... to keep payments within the agreed range"? Fine, but how did that "increase senior liabilities"? It seems like if you're just keeping payments within a range, then nothing would have "increased" necessarily ... it just stayed high despite a drop in rates.<br /><br />I was curious, so I grabbed a term sheet just now from Credit Suisse for a possible $15m swap agreement related to a floating rate mortgage on one of our buildings, and I have NO idea how this works. Something to do with payoff = index rate minus strike, and there's a cap rate/strike that varies based on termination date ...reitspothttps://www.blogger.com/profile/01559146919057254065noreply@blogger.com