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Finance & Banking vocabulary · Treasury & Markets

Swap

Meaning in finance & banking, with examples

/swɒp/nounCommon term

In finance & banking, swap means: A contract in which two parties exchange cash flows or currencies for a period, such as fixed interest payments for floating ones.

In Turkish: swap, swap işlemi, takas işlemi

How it is used

Used in treasury, corporate finance and central banking. In an interest rate swap one side pays fixed and the other floating; in a currency swap the parties exchange two currencies and swap them back at maturity. Banks use FX swaps daily to manage liquidity in different currencies.

Example sentences

  1. We entered into an interest rate swap to turn our floating-rate loan into a fixed-rate one.

  2. The treasury used FX swaps to raise short-term dollar liquidity.

Common collocations

  • interest rate swap
  • currency swap
  • FX swap
  • swap line
  • enter into a swap
  • derivativeA financial contract whose value depends on the price of something else, such as a currency, interest rate, share or commodity.
  • hedgeTo reduce the risk of losing money from changes in prices, interest rates or exchange rates, usually by taking an opposite position with derivatives.
  • fixed rateAn interest rate that stays the same for the whole loan or deposit term, or for an agreed period, so the payments do not change.
  • variable rateAn interest rate that can go up or down during a loan or deposit term, usually because it follows a benchmark rate.
  • treasuryThe department of a bank or company that manages its cash, liquidity, funding, foreign exchange and interest rate risk; also the government ministry in charge of public money.

More terms: Treasury & Markets

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This page explains English vocabulary for learners. It is not financial advice.