Interest Rate Swap

An exchange of two debt instruments with different rates of interest, made to tailor cash flows to the two counterparties different requirements. The three main types of interest rate swaps are:

• basis swaps (one floating rate index to another floating rate index in the same currency)
• coupon swaps (fixed rate to floating rate in the same currency)
• cross-currency interest rate swaps (fixed rate in one currency to floating rate in another)