SWAPS

Swap
 A Swap transaction is one whereby two or more parties
exchange one set of pre-determined payments for others.
 A Swap is an agreement between two parties (counter-
parties) to trade cash flows over a period of time.
 Generally, a swap deal is entered into with the help of a
mediator, known as swap dealer.
Types of Swaps
 Interest Rate Swap
- It’s an agreement between two parties to exchange
interest obligations or receipts in the same currency on an
agreed amount of notional principal for an agreed period
of time.

 Currency Swap
- An agreement between two parties to exchange payments
(receipts) in one currency for the same in another currency.
Types of Swaps-Contd.

 Equity Swap
- An agreement by which a party exchanges an inflow of
variable dividend for the flow of stable dividend (or fixed
or floating interest) with another party for a pre-decided
period of time.