Ask the Chatbot Games & Quizzes History & Society Science & Tech Biographies Animals & Nature Geography & Travel Arts & Culture ProCon Money Videos
swap agreement
References
Britannica AI Icon

swap agreement

international finance
Written by
The Information Architects of Encyclopaedia Britannica

The Information Architects maintain a master list of the topics included in the corpus of  Encyclopædia Britannica, and create and manage the relationships between them.
The Information Architects of Encyclopaedia Britannica
Last updated

Quick Summary

A swap agreement is a financial contract where two parties exchange future payment streams for a set period, typically to manage risk. The most common types are interest rate swaps, currency swaps, and credit default swaps.12

  • Interest Rate Swaps: Parties exchange fixed-rate payments for floating-rate payments, or vice versa, on a notional principal amount.12
  • Currency Swaps: Involve exchanging principal and interest payments denominated in different currencies.12
  • Credit Default Swaps (CDS): Act like insurance against the default of a bond or debt instrument.12

Swaps are over-the-counter (OTC) derivatives, meaning they are customized and negotiated directly between parties. They help businesses and governments manage risks related to interest rates, foreign exchange, and credit default. The Chiang Mai Agreement, for instance, established currency swap arrangements among Asian nations to provide emergency liquidity.13

Summary created from Britannica articles using AI. AI can make mistakes, so verify using Britannica articles.
5 Britannica Sources
  1. The swaps market: How companies manage interest rate and other risks with OTC derivatives
  2. Regulation of the OTC derivatives market: Before and after the Dodd-Frank Act
  3. central bank
  4. Chiang Mai Agreement
  5. The swaps market: How companies manage interest rate and other risks with OTC derivatives: Top Questions

Ask Britannica AI about this topic

Britannica doesn't have a full article on this topic, so we've curated a list of our relevant coverage.