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swap /'swäp/ n1: an exchange of securities2: a derivative contract in which two parties (as corporations) agree to exchange rates esp. relating to debt
Merriam-Webster’s Dictionary of Law. Merriam-Webster. 1996.
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index
barter, exchange, interchange, replace, replacement, trade (commerce)
Burton's Legal Thesaurus. William C. Burton. 2006
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An over-the-counter derivative contract between two parties to exchange a series of interest rate flows or payments for a stated period of time. For example, swaps enable parties to convert:• Fixed rate liabilities or assets into floating rate liabilities and vice versa in a given currency (interest rate swap).• Liabilities in one currency into another currency (currency swap).+ swapUSAA private agreement between two parties (known as counterparties) who agree to exchange specified cash flows based on the performance of a debt obligation or based on fluctuations in the value of an equity security, commodity or other asset, or fluctuations in interest rates or relative currency values. One party is typically the fixed rate payer, which pays a fee, often in monthly or other regular installments, and the other party is usually the floating rate payer, which makes one or more payments to the fixed rate payer based on the occurrence of certain events with respect to a third party, the reference entity, or a basket or index of third parties, the reference entities. In certain instances both parties may be floating rate payers with the "fee" paid by the first floating rate payer determined by reference to LIBOR or another index. Swaps are often entered into for the purpose of hedging against risk, such as the risk that an obligor on a debt obligation will be unable to pay or that an equity security, index or option will decline in value. However, there is no requirement that the underlying obligation or instrument be owned by a party to a swap, so swaps are often used as speculative investments. Typical forms are interest rate swaps, credit default swaps, total return swaps, foreign currency swaps and equity swaps.Related terms
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.