Interest Rate Derivatives

At TD Securities, our dedicated risk management specialists customize solutions to reduce risk and advise on market strategy and execution of swaps, options and structured solutions.

Proper risk management allows our clients to focus on running their business. By reducing unwanted risk, you can minimize cash flow volatility, making your organization more attractive to both lenders and investors.

We have the expertise to tailor a comprehensive range of risk management products to suit your needs:

Interest Rate Swaps

Allow your organization to convert its floating rate debt into an instrument that is effectively a fixed rate debt to protect against rising interest rates.

Benefits:

1. Flexible risk management to protect against market risk and once approved, borrowers can enter into a swap at any time.
2. Customization with respect to the forward start date, repayment schedule, maturity, currency and amendments.
3. Unwinding a swap before maturity will result in either a market gain or loss depending upon the movement in market rates whereas with a term loan, prepayment will only result in a penalty payment.
4. An Interest Rate Swap changes the effective interest rate you pay. It does not change any feature of your existing loan or any other part of your organization’s balance sheet.

Interest Rate Caps

Protect your organization against rising interest rates by capping the interest rate on your floating rate loan.

Benefits:

1. Provide insurance against a rise in rates, while benefiting from lower rates.
2. Flexible risk management and customization.
3. The Interest Rate Cap can be sold at prevailing market prices if the underlying loan is repaid and protection no longer needed.

Interest Rate Collars

Limit your interest rate risk within a known range by agreeing to both a cap and minimum rate.

Benefits:

1. Interest rate protection of a cap with potentially lower up-front costs.
2. Flexible risk management and customization. You can specify the range (between the cap and the floor) to suit your organization’s risk tolerance and interest rate expectations.
3. Collars may be canceled or unwound at prevailing market rates. Similarly to unwinding a swap, you may realize a gain or a loss depending on market conditions.

Bankers’ Acceptances

Limit your borrowing costs by accessing funds below Prime. Often thought of as the first step toward controlling your borrowing costs for longer periods of time.

Benefits:

1. Your organization is assured of paying competitive rates as determined in the open market, based on the supply and demand for short-term money. The result is that your organization often receives better rates than a Prime- based loan.
2. Combining a BA with a Swap allows you to fix borrowing costs for a longer period of time.