What does swaps mean?

In finance, a swap is a derivative contract in which one party exchanges or swaps the values or cash flows of one asset for another. Of the two cash flows, one value is fixed and one is variable and based on an index price, interest rate, or currency exchange rate.

Are swaps OTC or exchange traded?

Unlike most standardized options and futures contracts, swaps are not exchange-traded instruments. Instead, swaps are customized contracts that are traded in the over-the-counter (OTC) market between private parties.

What are swaps and derivatives?

Risk management and swap derivatives Swaps are used to manage risk in a couple ways. First, you can use swaps to ensure favorable cash flows, either through timing (as with the coupons on bonds) or through the types of assets being exchanged (as with foreign exchange swaps that ensure a corporation has the right type of currency).

What is a standard swap?

In computer programming and computer science, a standard swap is a situation in a program in which two variables need to have their values exchanged, requiring the creation of a third variable to act as an intermediary when the values are transferred.