reverse swap

reverse swap
A swap in which a party to a previous swap agrees to make payments calculated by reference to the type of interest which he is to receive under the earlier swap and to receive payments calculated by reference to the type of interest in which he is to make payments under the original swap. Therefore, if he is paying a variable rate under the first swap, under the second swap he will be paying a fixed rate and vice versa. If the variable rate in each swap is calculated in the same way, the party's net position on the two swaps will depend on the margin between the two fixed rates.

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

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