Definitions In a swap two counterparties agree to a contractual arrangement wherein they agree to exchange cash flows at periodic intervals There are two types of interest rate swaps Single currency interest rate swap Plain vanilla fixed-for-floating swaps are often just called Interest rate swaps Cross-Currency interest rate swap This is often called a currency swap fixed for fixed rate debt service in two(or more)currencies McGraw-Hilylrwoin 10-3 Copyright@ 2001 by The McGraw-Hill Companies, Inc. All rightsMcGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 10-3 Definitions ⚫ In a swap, two counterparties agree to a contractual arrangement wherein they agree to exchange cash flows at periodic intervals. ⚫ There are two types of interest rate swaps: ◼ Single currency interest rate swap ◆“Plain vanilla” fixed-for-floating swaps are often just called interest rate swaps. ◼ Cross-Currency interest rate swap ◆This is often called a currency swap; fixed for fixed rate debt service in two (or more) currencies