3: Choosing a Swap

Choosing a Swap Rate: Swaps vs. the “True” Cost of LIBOR: When deciding on whether to lock-in a fixed rate with a swap, borrowers often compare the swap rate to current or historical LIBOR rates. This white paper argues that the proper comparison is made by using the “true” cost of LIBOR…a multi-year historical average of LIBOR over a term as the swap. This approach guards against locking-in a fixed rate at a time of a short-term elevation in LIBOR.