Dictionary meaning of swap is " to take part in exchange" or " to exchange one thing for another thing "
Swap is a Derivative instrument .It is one of the different types of derivatives.Swap is a contract to exchange cashflows between two parties at an agreed rate .
Swaps are financial instruments to exchange cash flows. Swaps are based on interest rates, stock indices, foreign currencies.
Common types of Swaps are
- Interest rate swap
- Currency swap
- Credit default swap
- Commodity swap
- Equity swap
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