Swap (finance)
A Swap is a financial instrument - derivative security
A swap is essentially an agreement in which both parties agree to exchange a strip of future interest payments; one party paying fixed interest payments, and one party paying floating interest payments, on some notional value.
The value of the swap is the net present value of all future interest payments.
Variations of swaps include cross currency swaps, amortizing swaps and so on.
You can also have an option on a swap - a swaption
See also: interest rate swap, caps, floors
