




A zero basis risk swap, or ZEBRA, is a specialized type of swap for municipalities. The zero basis risk swap is an agreement between a municipality and a financial intermediary. Also known as "perfect swap" or "actual rate swap," a zero basis risk swap has the municipality pay out fixed interest and take in floating interest. The floating rate the municipality receives on zero basis risk swap equals the rate on public outstanding floatingrate debt already issued by the municipality that engages in the zero basis risk swap. Basis risk is the risk factor of uncorrelated hedging, and in a zero basis risk swap this risk is zero because the zero basis risk swap's risk is perfectly correlated by definition. A zero basis risk swap can help cities plan annual budgets without worrying about changes in interest rates.
Rate this Zero Basis Risk Swap definition...




Where is the market headed? The answer may surprise you. Find out with the exclusive & Barron's recommended charts of Chart of the Day. 

Popular Terms: in escrow, irrevocable trust, FICO score, labor relations, required rate of return, current ratio, debt service coverage, margin rate, risk management, retained earnings, covered put, 1035 exchange, average price per share, phantom income, 144a, Key Rate Duration, implied volatility, quality assurance, cancelled check, reverse mortgage, stock market close, limit order, inflation, liquidity ratio, diluted share, command economy, option premium, EBITDA, exdividend, minority interest, FTSE, annual return, 401a, LIBOR, balance sheet, whollyowned subsidiary, per diem, exdividend date, Zero Cost Collar, deferred revenue, stock split, 1031 exchange, VIX, real GDP, deferred tax, class C shares, open position, dividends payable, APR


 