Asset swap
Encyclopedia
An asset swap is an exchange of tangible assets for intangible asset
s or vice versa. Since it is a swap of assets, the procedure takes place on the active side of the balance sheet and has no impact on the latter in regards to volume. As an example, a company may sell equity and receive the value in cash thus increasing liquidity.
A company often utilizes this method when in need for money to invest (internal financing
) or to pay-off debts.
In finance
, the term asset swap has a particular meaning. When one refers to an asset swap, one has in mind the exchange of the flow of payments from a given security (the asset) for a different set of cashflows. An example of this is where an institution swaps the cashflows on a U.S. Government Bond
for LIBOR minus a spread (say 20 basis points). Such swaps usually have stub period
s in order to bring the chronology of the cashflows into line with that of the underlying bond.
Intangible asset
Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset...
s or vice versa. Since it is a swap of assets, the procedure takes place on the active side of the balance sheet and has no impact on the latter in regards to volume. As an example, a company may sell equity and receive the value in cash thus increasing liquidity.
A company often utilizes this method when in need for money to invest (internal financing
Internal financing
In the theory of capital structure, internal financing is the name for a firm using its profits as a source of capital for new investment, rather than a) distributing them to firm's owners or other investors and b) obtaining capital elsewhere. It is to be contrasted with external financing which...
) or to pay-off debts.
In finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
, the term asset swap has a particular meaning. When one refers to an asset swap, one has in mind the exchange of the flow of payments from a given security (the asset) for a different set of cashflows. An example of this is where an institution swaps the cashflows on a U.S. Government Bond
Treasury
A treasury is either*A government department related to finance and taxation.*A place where currency or precious items is/are kept....
for LIBOR minus a spread (say 20 basis points). Such swaps usually have stub period
Stub period
In finance, in particular with reference to bonds and swaps, a stub period is a period of time over which interest accrues which is not equal to the usual interval between bond coupon....
s in order to bring the chronology of the cashflows into line with that of the underlying bond.