Forward Swap

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Forward Swap

An agreement between two investors to swap assets, interest rates, or almost anything else on a set date in the future. A forward swap exists in order to provide investors with flexibility in accomplishing their investment goals; for example, the counterparties may wish to use a swap to hedge their risk, but are willing to accept the risk for the first year of an investment. A forward swap can consist of more than one swap: for example, the counterparties can agree to swap interest rates beginning in six months and then to swap different interest rates a year after that.
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