Page 90 - PRIAA Glossary

INTEREST RATE SWAPTION
An option to enter into a predetermined interest rate swap where the holder of the option has the right, but not the obligation, to enter into an interest rate swap on a specified future date and at a specified future rate and term. Typically, interest rate swaptions can be European, American or Bermudan in style.
INTERGOVERNMENTAL AGREEMENT (IGA)
An agreement between the United States and certain other countries that determines how Foreign Account Tax Compliance Act (FATCA) liabilities and reporting may be managed through those countries’ tax authority instead of reporting directly to
the US IRS. There are two types of IGAs—Model 1 which covers most of the 40+ IGA agreements signed to date and involves a reciprocity of tax information exchange and Model 2 (notably Japan and Switzerland) which retains some of the FATCA requirements usually due to local client confidentiality rules.
INTERMEDIATE HOLDING COMPANY (IHC)
A type of company that needs to be established by foreign banking organisations to meet certain thresholds as per the Federal Reserve Board’s final Enhanced Prudential Standards (EPS) rules.
INTERMEDIATION
A process whereby a third party facilitates an over-the-counter (OTC) derivative transaction between other counterparties who would not otherwise trade with each other. The intermediating party is usually of very high credit quality.
INTERNAL FRAUD
Risk of losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or the company policy, excluding diversity/discrimination events, which involves at least one internal party.
INTERNAL RATE OF RETURN (IRR)
The interest rate at which the sum of the positive cash flows (returns on investment) equals the initial investment. When the IRR is used to discount cash flows, this results
in a net present value of zero. IRR is a common measure of
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