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- DictionarySwap/swäp/
verb
- 1. take part in an exchange of: "we swapped phone numbers"
noun
- 1. an act of exchanging one thing for another: "let's do a swap"
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What does swap mean?
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Learn the meaning, synonyms, examples, and history of the word swap, which can be a verb or a noun. A swap is an act, instance, or process of exchanging one thing for another.
Learn the meaning of swap as a verb and a noun, with usage examples and synonyms. Find out how swap is used in finance, business and everyday situations.
Learn the meaning of swap as a verb and a noun, with examples of usage and synonyms. Find out how swap is used in different contexts, such as finance, business and everyday life.
Learn the meaning and usage of the verb and noun swap, which means to exchange, barter, or trade one thing for another. See synonyms, origin, and examples of swap in sentences.
- What Is A Swap?
- Swaps Explained
- Other Swaps
- The Bottom Line
A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything. Usually, the principal does not change hands. Each cash flow comprises o...
Interest Rate Swaps
In an interest rate swap, the parties exchange cash flows based on a notional principal amount of an underlying security. The amount of the security itself is not actually exchanged, only the interest rates. Also, the swap can be an amortizing swap, where the underlying principle of a loan will decrease over time. Parties undertake swaps in order to hedge against interest rate risk or to speculate. For example, imagine ABC Co. has just issued $1 million in five-year bonds with a variable annu...
Scenario 1
If LIBOR rises by 0.75% per year, Company ABC's total interest payments to its bondholders over the five-year period amount to $225,000. Let's break down the calculation: In this scenario, ABC did well because its interest rate was fixed at 5% through the swap. ABC paid $15,000 less than it would have with the variable rate. XYZ's forecast was incorrect, and the company lost $15,000 through the swap because rates rose faster than it had expected.
Scenario 2
In the second scenario, LIBOR rises by 0.25% per year: In this case, ABC would have been better off by not engaging in the swap because interest rates rose slowly. XYZ profited $35,000 by engaging in the swap because its forecast was correct. This example does not account for the other benefits ABC might have received by engaging in the swap. For example, perhaps the company needed another loan, but lenders were unwilling to do that unless the interest obligations on its other bonds were fixe...
The instruments exchanged in a swapdo not have to be interest payments. Countless varieties of exotic swap agreements exist, but relatively common arrangements include commodity swaps, currency swaps, debt swaps, and total return swaps.
A swap is a derivative contract where one party exchanges or "swaps" the cash flows or value of one asset for another. For example, a company paying a variable rate of interest may swap its interest payments with another company that will then pay the first company a fixed rate. Swaps can also be used to exchange other kinds of value or risk like t...
4 days ago · Learn the meaning and usage of the verb and noun swap, which means to exchange or trade something for another. Find synonyms, pronunciation, and related terms for swap in different contexts.
Learn the meaning, usage and synonyms of the word swap, which can be a verb, a noun or an exchange. Find out how to use swap in different contexts, such as finance, business, computer science and slang, with examples and translations.
