swap


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Related to swap: Swap Shop, Currency swap, Interest rate swap

Swap

An 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

The exchange of two securities, interest rates, or currencies for the mutual benefit of the exchangers. For example, in an interest rate swap, the exchangers gain access to interest rates available only to the other exchanger by swapping them. In this case, the two legs of the swap are a fixed interest rate, say 3.5%, and a floating interest rate, say LIBOR + 0.5%. In such a swap, the only things traded are the two interest rates, which are calculated over a notional value. Each party pays the other at set intervals over the life of the swap. For example, one party may agree to pay the other a 3.5% interest rate calculated over a notional value of $1 million, while the second party may agree to pay LIBOR + 0.5% over the same notional value. It is important to note that the notional amount is arbitrary and is not actually traded.

swap

A contract in which two parties agree to exchange periodic interest payments. In the most common type of swap arrangement, one party agrees to pay fixed interest payments on designated dates to a counterparty who, in turn, agrees to make return interest payments that float with some reference rate such as the rate on Treasury bills or the prime rate. Also called interest rate swap. See also counterparty risk.

swap

To trade one asset for another. Also called exchange, substitute, switch.

Swap.

When you swap or exchange securities, you sell one security and buy a comparable one almost simultaneously.

Swapping enables you to change the maturity or the quality of the holdings in your portfolio. You can also use swaps to realize a capital loss for tax purposes by selling securities that have gone down in value since you purchased them.

More complex swaps, including interest rate swaps and currency swaps, are used by corporations doing business in more than one country to protect themselves against sudden, dramatic shifts in currency exchange rates or interest rates.

swap

the bilateral (and multilateral) exchange of a product, business asset, interest rate on a financial debt, or currency for another product, business asset, interest rate on a financial debt, or currency, respectively;
  1. product swaps: individual A offers potatoes to individual B in exchange for a bicycle. See BARTER;
  2. business asset swaps: chemical company A offers its ethylene division to chemical company B in exchange for B's paint division. This enables both companies to divest (see DIVESTMENT) parts of their business they no longer wish to retain while simultaneously entering, or strengthening their position in, another product area;
  3. INTEREST-RATE swaps on financial debts: a company that has a variable-rate debt, for example, may anticipate that interest rates will rise; another company with fixed-rate debt may anticipate that interest rates will fall. It therefore contracts to make variable interest-rate payments to the first company and in exchange is paid interest at a fixed rate. Interest-rate swaps may be undertaken simultaneously on a variety of debt instruments thereby enabling corporate treasurers to lower the company's total interest payments;
  4. currency swap: the simultaneous buying and selling of foreign currencies. This can take two main forms: a spot/forward swap (the simultaneous purchase or sale of a currency in the SPOT MARKET coupled with an offsetting sale or purchase of the same currency in the FORWARD MARKET); or a forward/forward swap (a pair of forward currency contracts involving a forward purchase and sale of a particular currency which mature at different future dates).

Currency swaps are used by firms which trade internationally to minimize the risk of losses arising from exchange rate changes (see EXCHANGE RATE EXPOSURE).

swap

the exchange of a product, interest rate on a financial debt, or currency for another product, interest rate on a financial debt, or currency respectively:
  1. product swaps: individual A offers potatoes to individual B in exchange for a bicycle. See BARTER;
  2. INTEREST RATE swaps on financial debts: a company that has a variable-rate debt, for example, may anticipate that interest rates will rise; another company with fixed-rate debt may anticipate that interest rates will fall. The second company therefore contracts to make variable-interest rate payments to the first company and in exchange is paid interest at a fixed rate. Interest rate swaps may be undertaken simultaneously on a variety of debt instruments, thereby enabling corporate treasurers to lower the company's total interest payments;
  3. currency swaps: the simultaneous buying and selling of foreign currencies. This can take two main forms: a spot/forward swap (the simultaneous purchase or sale of a currency in the SPOT MARKET coupled with an offsetting sale or purchase of the same currency in the FUTURES MARKET); or a forward/forward swap (a pair of forward currency contracts, involving a forward purchase and sale of a particular currency which mature at different future dates).

Currency swaps are used by firms that trade internationally to minimize the risk of losses arising from exchange rate changes (see EXCHANGE RATE EXPOSURE). See DERIVATIVE.

References in periodicals archive ?
Located in Central Florida, Swap Negotiators provides advocacy, expertise, and advice on interest rate swap contracts for commercial borrowers and works in partnership with banks, commercial real estate attorneys and mortgage brokers to provide transparent pricing, valuations and ongoing support for the life of a swap.
However, the full contours of the pre-enactment swap reporting requirements remain to be seen, and will presumably only become clear with the issuance of a proposed final rule on this subject later this year.
SAVE 140 calories Swap albondigas (meatballs), 400 calories, for arroz con pollo (rice with chicken), 200 calories
We believe that this association with Property Swap Shop, will augment the strong track record of both our companies in creating and managing property swap options for our clients both in both countries," commented Peter Penhall, Chief Executive, Gowealthy.
Swap dealers act as intermediaries in arranging swaps.
In light of this ruling, it may be advisable for taxpayers to review their treatment of interest-rate swaps and determine if they have been under-or overreporting gain or loss from terminated hedged transactions.
Regardless of the fact that the counterparty may have posted such collateral in accordance with Standard & Poor's criteria after 30 days, the obligation of the swap counterparty is to find a replacement swap counterparty to which it may assign its rights and obligations under the agreement, which will remain in effect.
4 Swap a Cornish pasty at 510 calories for a reduced fat chicken salad sandwich (260).
Like most engineers, Rice, when asked to define derivatives in general and the basic concept of a fixed-to-floating interest-rate swap in particular, literally draws a picture of the transaction on a napkin--his engineering background coming into play, he says.
The allocation swap allows you to readjust by bringing those allocations back into line.
The swap agreement establishes a price of $13 per barrel for 1.