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Swap1. In the exchange markets, this is a simultaneous sale of a currency on the spot market together with a purchase of the same amount on the forward market. By combining these two transactions into a single one, transactions costs may be reduced. 2. An arrangement between central banks whereby they each agree to lend their currency to the other.SwapTraditionally the exchange of one security for another to change the maturities of a bond portfolio or the quality of the issues in a stock or bond portfolio, or because investment objectives have changed.Currency swaps involve the purchase/sale of a currency in the spot market against the simultaneous purchase/sale of the same amount of the currency in the forward market.An interest rate swap is an arrangement in which two parties agree to exchange periodic interest payments, at agreed intervals, over an agreed period, but without any principal being paid. The most common and simplest deal involves one party paying a fixed rate of interest and the other paying a floating rate.SwapAn arrangement in which two entities lend to each other on different terms, e.g., in different currencies, and/or at different interest rates, fixed or floating.Swap Similar MatchesCurrency swapCurrency swapAn arrangement in which two parties exchange a series of cashflows in one currency for a series of cashflows in another currency, at agreed intervals over an agreed period.Companies would do this where they have existing borrowings in a currency which they want to convert into a borrowing in another currency. If its borrowing is at a fixed rate, and it is exchanging for another fixed rate borrowing, the swap is a 'fixed rate currency swap'.Unlike an interest rate swap, a currency swap usually does involve an exchange of the principal borrowed amount as well as the interest payments. SwaptionSwaptionOptions on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement by some specified date in the future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to the swap if the buyer exercises. Asset for asset swapAsset for asset swapCreditors exchange the debt of one defaulting borrower for the debt of another defaulting borrower. Amortizing interest rate swapAmortizing interest rate swapSwap in which the principal or notional amount rises (falls) as interest rates rise (decline). Bond swapBond swapThe sale of one bond issue and purchase of another bond issue simultaneously. See: Swap; swap order. Further Suggestionsresult of stock swapCurrency swap Swap assignment Pure yield pickup swap Foreign exchange swap Swap buy back Substitution swap Circus swap Quanto swap Call swaption Put swaption Swap rate Step up swap Differential swap Plain vanilla swap International Swap Dealers Association (ISDA) interest rate swap Extension swap Reverse a swap Equal shares swap Equal dollar swap Swap rate Debt/equity swap Stock index swap Currency swap |
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