The financial encyclopedia uses cookies to improve your user experience. Find out more here!



 

 


 

Swap
 

 

A financial derivative in which two counter-parties agree to exchange one stream of cash flows for another stream. In an interest rate swap a flow of payments at a fixed interest rate is swapped for a flow at a variable interest rate. A currency swap involves the initial exchange of principal denominated in two different currencies, payments of interest in the currency received over the lifetime of the swap, and a final re-exchange of principal. See also derivative.

 

Reference: Oxford Press Dictonary of Economics, 5th edt.