- Swap
- An arrangement whereby two companies lend to each other on different terms, e.g. in different currencies, and/or at different interest rates, fixed or floating. The New York Times Financial Glossary
* * *
FINANCE to exchange one investment for another:swap something for something• Investors have doubled their money after swapping the bonds for a package of cash and shares.
FINANCE an exchange of one investment for another:• The tax-free stock swap was valued at almost $880 million.
• The Accounting Standards Board has launched a project to value debt-for-equity swaps more accurately.
ˈcurrency ˌswap FINANCEan exchange of the interest payments when two lenders have made loans in different currencies with the same interest rate. This happens so that each lender receives the interest in the currency of the other loan:• Interest-rate swaps, currency swaps and other instruments known as derivatives allow corporate clients to protect themselves against financial risks.
when a company gives shares to lenders in exchange for loans they have made:• The bank has become a shareholder in companies through debt-equity swaps.
ˈinterest rate ˌswap FINANCEan exchange between a borrower with one type of loan and a borrower with a different type of loan. Each borrower is looking for an advantage that the original loan did not have, for example that the loan is in a particular currency, has a particular interest rate, is for a particular period of time etc:• It entered an interest rate swap transaction where it exchanged its fixed-rate liabilities for floating-rate payments.
* * *
An exchange of cash flows between two counterparties designed to offset interest rate or currency risk and to match their assets to their liabilities. For example, a company may have costs which it must pay in Swiss francs while its revenues are in US dollars. Another company may have the opposite requirement. A bank, in exchange for a fee, arranges a currency swap which meets both requirements. The same is true of interest rate swaps, which allow two parties to exchange fixed rate for floating rate risk to their mutual advantage. A key point is that parties to a swap do not exchange principal, or the underlying fixed amount of debt, but just cash flow, or the interest payments.* * *
Ⅰ.swap UK US (-pp-) (UK also swop) /swɒp/ verb [T]► FINANCE to exchange one investment for another: »Lenders agreed to swap part of Eurotunnel's £8.8 billion debt for shares.
► FINANCE to exchange payments on a loan in one currency for those in another: »The county will swap its variable-rate interest payments for the certainty of a fixed rate payment.
► to exchange something you have for something else: »John and Marla agreed to swap offices.
swap sth for sth »Most consumers said they wouldn't swap the product for a cheaper own-label brand.
swap sth with sb »Do you want to swap seats with me?
Ⅱ.swap UK US (UK also swop) /swɒp/ noun [C]► FINANCE a situation in which one investment is exchanged for another: »Many investors carry out debt-for-equity swaps.
► FINANCE a situation in which payments on a loan in one currency are exchanged for those in another: »A firm that wants a US dollar loan can arrange with a firm that wants a floating rate Yen loan for an interest rate swap.
► a situation in which someone exchanges something they have for something else: »Her boss suggested they do a job swap for a day.
→ See also CURRENCY SWAP(Cf. ↑currency swap), DEBT-EQUITY SWAP(Cf. ↑debt-equity swap), INTEREST RATE SWAP(Cf. ↑interest rate swap), CREDIT DEFAULT SWAP(Cf. ↑credit default swap)
Financial and business terms. 2012.
