Non-Deliverable Swap

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Non-Deliverable Swap

A swap in which the two legs are a major currency and an inconvertible currency. In a non-deliverable swap, the parties net the difference between the exchange rate listed in the swap contract and the spot rate, and one party pays the other that difference. They are usually settled in U.S. dollars. Multinational corporations and countries with minor currencies sometimes use non-deliverable swaps to hedge risk associated with comparatively illiquid currencies.