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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 ?
The practice of land swops, carried out en masse during the tripartite coalition's time in government, was soundly criticised by the opposition of the time and environmentalist groups, who saw it as a means to exchange land in remote areas for plots in prime locations, which often became the target of real estate developments.
chroma between gravure printing by a Japanese printer on a heavy-weight coated stock and SWOP proofing on a #5 groundwood stock.
Borissov's first reaction was to say that his Government would not defend the land swops, adding that the Cabinet would look into whether Parliament could undo the land swops retroactively.
The duo finished third and first respectively in a Sandown handicap last time and Swop is an 11-2 chance with the sponsors for the nine-furlong handicap.
FLOWER lovers will be able to swop tips at a meeting this month.
Around 15pc of drivers would also swop points for driving in a bus lane and 13pc would do so for going through a red light.
Combination of Canon's iPF x100 Large Format Printers and EFI Inkjet Proofing System Awarded SWOP "Grade 3" Certifications
LUCA CUMANI yesterday confirmed Dane O'Neill would ride Swop in next Saturday's William Hill Lincoln, writes Tony Elves.
Committee Chairman Cllr Mike Stoker, who seconded the move, added: "If a land swop cannot be arranged we will come back again to look at it.
Canon's iPF x100 Series Large Format Printers and CGS PearlProof Media Awarded SWOP Grade 3 and 5, and GRACol Grade 1 Certifications
Contract notice: The purchase of maintenance services for the software and a dedicated database system swop (support system police service), along with a pool of man-hours for additional work related to the modernization of the system swop.
Ryan Moore, who won the previous race on the Luca Cumani-trained Swop, was denied a quick double in the 1m4f handicap in which he almost made all on David Elsworth's Classic Punch.