interest rate swap
An agreement under which two parties agree to exchange or "swap" a series of payments corresponding to each other's interest payment obligations. See also swap.
+ interest rate swap
USA
A type of over-the-counter derivative (OTC derivative) under which one party, typically called the fixed rate payer, pays a fee (usually monthly or quarterly) to the other party, the floating rate payer, which pays a variable amount based on LIBOR to the fixed rate payer. (Sometimes both parties are floating rate payers where the fee is based on a floating index or other floating rate such as LIBOR.) The payments are usually made by both parties on the same date. Parties use interest rate swaps to lock in their periodic interest-payment amounts in circumstances where they need to fix cash outflow. Consequently, interest rate swaps are often entered into by issuers in securitization transactions, so that market interest rate fluctuations do not adversely impact the ability to make regular principal and interest payments to the holders of the debt securities they have issued.
Related terms

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

Look at other dictionaries:

  • Interest rate swap — An interest rate swap is a derivative in which one party exchanges a stream of interest payments for another party s stream of cash flows. Interest rate swaps can be used by hedgers to manage their fixed or floating assets and liabilities. They… …   Wikipedia

  • interest rate swap — A financial instrument representing a transaction in which two parties agree to swap or exchange net cash flows, on agreed upon dates, for an agreed upon period of time, for interest on an agreed upon principal amount. The agreed upon principal… …   Financial and business terms

  • Interest rate swap — A binding agreement between counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one party will pay fixed and receive variable. The New York… …   Financial and business terms

  • interest-rate swap — A financial instrument representing a transaction in which two parties agree to swap or exchange net cash flows, on agreed upon dates, for an agreed upon period of time, for interest on an agreed upon principal amount. The agreed upon principal… …   Financial and business terms

  • interest-rate swap — A form of dealing between banks, security houses, and companies in which institutions exchange interest rate payments on a notional capital value. Swaps can be in the same currency or cross currency (see cross currency interest rate swap). If a… …   Big dictionary of business and management

  • interest rate swap — palūkanų normų apsikeitimo sandoris statusas Aprobuotas sritis išvestinių finansinių priemonių rinka apibrėžtis Sandoris, pagal kurį fiksuota palūkanų norma keičiama kintama palūkanų norma ir atvirkščiai arba kintama palūkanų norma keičiama kita… …   Lithuanian dictionary (lietuvių žodynas)

  • Interest Rate Swap — An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that …   Investment dictionary

  • interest rate swap — noun A contract to exchange the benefit of one interest rate with another. Often a fixed interest rate being exchanged for a variable rate so as to allow one party to remove an exposure to a variable rate for which they pay a premium on the fixed …   Wiktionary

  • Interest Rate Swap — Ein Zinsswap ist ein Zinsderivat, bei dem zwei Vertragspartner vereinbaren, zu bestimmten zukünftigen Zeitpunkten Zinszahlungen auf festgelegte Nennbeträge auszutauschen. Die Zinszahlungen werden meist so festgesetzt, dass eine Partei einen bei… …   Deutsch Wikipedia

  • interest rate swap — / ɪntrəst reɪt ˌswɒp/ noun an agreement between two companies to exchange borrowings (a company with fixed interest borrowings might swap them for variable interest borrowings of another company). Also called plain vanilla swap …   Dictionary of banking and finance

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