A contract to buy and sell currencies with spot ( cash and carry) or forward contracts. The contract provides for the buying and selling to occur at different times; thus, each party acquires a currency it needs for a predetermined period of time at a predetermined price, and locks in a sales price for the currency as well. The CENTER ONLINE Futures Glossary
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(1) The sale of one or more securities in order to purchase one or more different securities with the proceeds from the sale. Bond swaps are usually done to take advantage of changes in market conditions or more favorable investment characteristics. For example, swaps are often done to lengthen or shorten maturities when investors change their outlook for future rates.
(2) A financial instrument representing a transaction in which two parties agree to swap or exchange some obligation. Swaps began with currency swaps, but the idea quickly spread to interest rate exchanges. In an interest rate swap, one party agrees to swap fixed-rate loan payments with the floating-rate payments of the other party. Interest rate swaps are often used in hedging.
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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. Bloomberg Financial Dictionary
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A forward type of contractual agreement to exchange one type of cash flow or asset for another, according to predetermined rules. Exchange Handbook Glossary
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▪ I. swap swap 1 [swɒp ǁ swɑːp] also swop verb swapped PTandPPX swapping PRESPARTX [transitive]
FINANCE to exchange one investment for another:
swap something for something
• Investors have doubled their money after swapping the bonds for a package of cash and shares.
• Employees were allowed to swap old, effectively worthless stock for new options.
[m0]
▪ II. swap swap 2 also swop noun [countable] FINANCE an exchange of one investment for another:
• The tax-free stock swap was valued at almost $880 million.
• The Accounting Standards Board has launched a project to value debt-for-equity swaps more accurately.
an exchange of the interest payments when two lenders have made loans in different currencies with the same interest rate. This happens so that each lender receives the interest in the currency of the other loan:
• Interest-rate swaps, currency swaps and other instruments known as derivatives allow corporate clients to protect themselves against financial risks.
ˈdebt swap also ˌdebt-ˈequity ˌswap or debt/equity swap FINANCE
when a company gives shares to lenders in exchange for loans they have made:
• The bank has become a shareholder in companies through debt-equity swaps.
an exchange between a borrower with one type of loan and a borrower with a different type of loan. Each borrower is looking for an advantage that the original loan did not have, for example that the loan is in a particular currency, has a particular interest rate, is for a particular period of time etc:
• It entered an interest rate swap transaction where it exchanged its fixed-rate liabilities for floating-rate payments.
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An exchange of cash flows between two counterparties designed to offset interest rate or currency risk and to match their assets to their liabilities. For example, a company may have costs which it must pay in Swiss francs while its revenues are in US dollars. Another company may have the opposite requirement. A bank, in exchange for a fee, arranges a currency swap which meets both requirements. The same is true of interest rate swaps, which allow two parties to exchange fixed rate for floating rate risk to their mutual advantage. A key point is that parties to a swap do not exchange principal, or the underlying fixed amount of debt, but just cash flow, or the interest payments.
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Ⅰ.
swap UK US (-pp-) (UK also swop) /swɒp/ verb [T]
► FINANCE »
Lenders agreed to swap part of Eurotunnel's £8.8 billion debt for shares.
► FINANCE »
The county will swap its variable-rate interest payments for the certainty of a fixed rate payment.
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John and Marla agreed to swap offices.
swap sth for sth »
Most consumers said they wouldn't swap the product for a cheaper own-label brand.
swap sth with sb »
Do you want to swap seats with me?
Ⅱ.
swap UK US (UK also swop) /swɒp/ noun [C]
► FINANCE »
Many investors carry out debt-for-equity swaps.
► FINANCE »
A firm that wants a US dollar loan can arrange with a firm that wants a floating rate Yen loan for an interest rate swap.
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Her boss suggested they do a job swap for a day.