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In finance, a swap is an agreement between two counterparties to exchange financial instruments, cashflows, or payments for a certain time.The instruments can be almost anything but most swaps involve cash based on a notional principal amount.
As OTC instruments, interest rate swaps (IRSs) can be customised in a number of ways and can be structured to meet the specific needs of the counterparties. For example: payment dates could be irregular, the notional of the swap could be amortized over time, reset dates (or fixing dates) of the floating rate could be irregular, mandatory break clauses may be inserted into the contract, etc.
A cross-currency swap's (XCS's) effective description is a derivative contract, agreed between two counterparties, which specifies the nature of an exchange of payments benchmarked against two interest rate indexes denominated in two different currencies.
In recent years, interest rate swaps have become an important component of the fixed-income market. With an interest rate swap, investors will typically exchange or swap a fixed-interest payment ...
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the ... explained how investors seeking high-margin returns use ...
An equity swap is a financial derivative contract (a swap) where a set of future cash flows are agreed to be exchanged between two counterparties at set dates in the future. [1] The two cash flows are usually referred to as "legs" of the swap; one of these "legs" is usually pegged to a floating rate such as LIBOR. This leg is also commonly ...
A credit default swap is a financial swap agreement that the seller of the CDS will compensate the buyer (the creditor of the reference loan) in the event of a loan default (by the debtor) or other credit event. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller and, in exchange, receives a payoff if the ...
According to the U.K.'s Financial Services Authority (FSA), the banks may have mis-sold up to 90% of the ... Swaps explained The charges related to rate swaps that the banks tacked on to variable ...