Financial Glossary what is interest-rate-swap


Interest Rate Swap

An arrangement in which two parties agree to exchange interest rate flows (periodic interest payments), at agreed intervals, over an agreed period, but without any principal being paid. The most common and simple deal involves one party paying a fixed rate of interest and the other paying a floating rate. IRSs are used for hedging, speculation or arbitrage. The interest rates are paid on a specified principal amount called the notional principal.
Back to Home