(according to the FX rate on the FX fixing date for the interest payment day). No initialexchange of the notional amount occurs unless the Fx fixing date and the swap start date fall inthe future.Fixed-for-floating swaps in different currencies are used to convert a fixed rate asset/liability inone currency to a floating rate asset/liability in a different currency, or vice versa. For example,if a company has a fixed rate USD 10 million loan at 5.3% paid monthly and a floating rateinvestment of JPY 1.2 billion that returns JPY 1M Libor +50 bps monthly, and wants to lock inthe profit in USD as they expect the JPY 1M Libor to go down or USDJPY to go up (JPYdepreciate against USD), then they may enter into a Fixed-Floating swap in different currencywhere the company pays floating JPY 1M Libor+50 bps and receives 5.6% fixed rate, lockingin 30bps profit against the interest rate and the fx exposur.
 Floating-for-floating rate swap, same currency
Party P pays/receives floating interest in currency A Indexed to X to receive/pay floating rate incurrency A indexed to Y on a notional N for a tenure of T years. For example, you pay JPY 1MLIBOR monthly to receive JPY 1M TIBOR monthly on a notional JPY 1 billion for 3 years.Floating-for-floating rate swaps are used to hedge against or speculate on the spread betweenthe two indexes widening or narrowing. For example, if a company has a floating rate loan atJPY 1M LIBOR and the company has an investment that returns JPY 1M TIBOR + 30 bps andcurrently the JPY 1M TIBOR = JPY 1M LIBOR + 10bps. At the moment, this company has anet profit of 40 bps. If the company thinks JPY 1M TIBOR is going to come down (relative tothe LIBOR) or JPY 1M LIBOR is going to increase in the future (relative to the TIBOR) andwants to insulate from this risk, they can enter into a float-float swap in same currency wherethey pay, say, JPY TIBOR + 30 bps and receive JPY LIBOR + 35 bps. With this, they haveeffectively locked in a 35 bps profit instead of running with a current 40 bps gain and indexrisk. The 5 bps difference (w.r.t. the current rate difference) comes from the swap cost whichincludes the market expectations of the future rate difference between these two indices and the bid/offer spread which is the swap commission for the swap dealer.Floating-for-floating rate swaps are also seen where both sides reference the same index, but ondifferent payment dates, or use different business day conventions. These have almost no usefor speculation, but can be vital for asset-liability management. An example would be swapping3M LIBOR being paid with prior non-business day convention, quarterly on JAJO (i.e. Jan,Apr, Jul, Oct) 30, into FMAN (i.e. Feb, May, Aug, Nov) 28 modified following
 Floating-for-floating rate swap, different currencies
Party P pays/receives floating interest in currency A indexed to X to receive/pay floating rate incurrency B indexed to Y on a notional N at an initial exchange rate of FX for a tenure of Tyears. For example, you pay floating USD 1M LIBOR on the USD notional 10 millionquarterly to receive JPY 3M TIBOR monthly on a JPY notional 1.2 billion (at an initialexchange rate of USDJPY 120) for 4 years.To explain the use of this type of swap, consider a US company operating in Japan. To fundtheir Japanese growth, they need JPY 10 billion. The easiest option for the company is to issuedebt in Japan. As the company might be new in the Japanese market without a well knownreputation among the Japanese investors, this can be an expensive option. Added on top of this,