Case study

Yin & Yang

a swap negotiation case study

by Professor Ian H. Giddy
New York University

This swap negotiation simulation is designed to emphasize the mechanics and principles of interest rate swaps and currency swaps.

Four teams are involved:

Basket Bancorp, ("The Borg") a less-than-top-quality bank holding company in Miami, is looking for medium-term, fixed rate US dollar funding.
Sushi Bank, ("Klingons") a high-rated Japanese institution, is seeking sub-LIBOR medium-term funding.
Metrobank, ("Vulcans") a US money center bank, is aiming to make a spread by negotiating and intermediating a swap. The bank is also interested in underwriting a Eurobond issue by Sushi Bank.
Global Bancorp ("Kardassians") is a rival to Metrobank. It has similar aims and capabilities.

Each team is given an information sheet on the basis of which a swap is to be negotiated. Your goal is to reach a successful conclusion, but not at the expense of losing money or taking excessive risk relative to the rewards. Doing a deal is highly desirable, but a bad deal is worse than no deal.

You may conduct negotiations by phone or face-to-face.

A "Results Report" sheet should be submitted by each team. One page should be enough. The report should contain specifics of the deal agreed to (or rejected), preferably with a sketch of who pays what to whom. At the top of each report please put Group and Team name (eg Group B, Sushi Bank), and the names of each team member.