Exchange of cash flows between loans
A PTRS is a simple exchange of cash flows between two counterparties based on a notional amount. On one side, the buyer, taking a long position on commercial property, pays a fixed percentage interest rate or LIBOR plus a spread. In return, he or she receives a cashflow based on the annual total return of the property index. The seller, taking the equivalent short position, pays and receives cashflows that are exactly opposite.
The interest rate used by the market is typically the three-month LIBOR. The spread that is added reflects expectations of the future performance of the index, and what buyers and sellers are prepared to accept to take the position (see the property spread). In January 2008, many banks switched from the LIBOR-based to a fixed interest rate convention.
In the event that the annual total return is negative, i.e. if the capital value drops sufficiently to wipe out income returns, the total return buyer pays that negative return to the seller, in addition to the quarterly interest payments. The property index commonly used is an annual index, which is based on the actual performance of a large number of institutional portfolios and comprises an income or rental and a capital growth element.
In addition to swaps, contracts-for-difference (CFDs) are used as trading instruments. For deals on residential indices, such as the Halifax House Price Index, CFDs are already common. A CFD represents an index that is artificially set at 100 when the deal is done. Investors and hedgers then state the price at which they are willing to buy or sell the index at maturity. If two counterparties agree on a three-year deal at 112 and the index rises to 116, then the buyer receives 116 ? 112 = 4 times the contract size from the seller. The transactions are cash free until maturity, when profits and losses are settled. Many market participants find CFDs more intuitive than swaps.
Improve your business and profits with CSS based website
Learn how a CSS and standards compliant website will improve your business and profits.
CSS layouts and web standards have been present on the web for many years, but only recently did they become a commonly applied financial solution for online businesses. Such situation was caused by the fact, that most browsers didn’t support CSS correctly (especially Netscape 4). Today CSS 2.0 is fully supported by almost every browser available.
Is there any reason to convert a thriving financial website that deals with payday loans, real estate etc. from a table-based layout to a CSS layout? The reason is simple, it will give you more money and improve financial stability of your business. Here’s how it works.
Reduced bandwidth costs
Files on business websites that adopted CSS layout are much smaller in size that those used on sites with traditional layout. You can reduce the size of your files as much as 50% if you decide to switch layouts. With smaller files you will be able to reduce your bandwidth costs, which for a high traffic financial site usually indicates huge savings.
The file size is reduced so dramatically because all presentation information is located in an external document, which is downloaded along with the page and then stored in your computer’s cache. With tables all layout data are located inside each web page document, so it has to be downloaded repeatedly with every page.
What is more, you can rely on CSS as an replacement for advertising JavaScript image rollovers, which gives you even more reduction in size.
A higher search engine ranking
A CSS-based financial website will be displayed higher in the search engine rankings when a particular phrase (such as payday loans, real estate, mortgage, etc.) is searched. This is because the code on your site is cleaner and search engines can access it more easily. You are also able to place the most important content at the top of your document and the whole content is more dense in comparison to code.
Obviously, a higher search engine ranking will provide your business with more customers interested in a credit, mortgage or other money service.
