SWAP

An interest rate swap is a derivative contract where two parties exchange interest payment obligations — typically one pays a fixed rate and the other pays a floating rate — on a notional principal amount without exchanging the principal itself.

Exchange of equity returns for fixed or floating interest payments.

The notional principal is the reference amount used to calculate swap cash flows; it is never actually exchanged between counterparties and serves only as the basis for computing interest payments.

Agreement to exchange cash flows based on commodity prices.

A plain vanilla swap is the most basic form where one party pays a fixed interest rate and receives a floating rate (usually linked to MIBOR or LIBOR), or vice versa, on the same notional amount for a specified tenor.

The fixed-rate payment stream made by one counterparty.

A currency swap is a derivative where two parties exchange principal and interest payments in different currencies, effectively converting a liability or asset in one currency into another currency.

Payment stream linked to a benchmark rate like MIBOR or LIBOR.