Updated: Aug 20, 2021

A financial derivative in which two counter-parties agree to exchange one stream of cash flows for another stream. In an interest rate swap a flow of payments at a fixed interest rate is swapped for a flow at a variable interest rate. A currency swap involves the initial exchange of principal denominated in two different currencies, payments of interest in the currency received over the lifetime of the swap, and a final re-exchange of principal. See also derivative.

Reference: Oxford Press Dictonary of Economics, 5th edt.

Sources & references
Risk disclaimer
James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.