Swap (finance)

A swap (English ( off ) exchange) is in the economic sense is a collective term for derivative financial instruments, which have in common is an exchange of future cash flows ( cash flows ). Swaps are OTC transactions. The agreement defines how the payments calculated and when they are due.

Application

With swaps cash flows of almost any nature can be changed. This can be specifically optimized financial risks in the financing, to the balance sheet or in the hedge of a portfolio. Swaps may be easier to trade and be their markets more liquid than the markets of the underlying assets. In addition, swaps allow as other derivatives, risks to act individually and separately from the corresponding base values.

Among the most frequently made ​​swaps

• Asset swap
• Foreign exchange (also FX swap)
• Equity Swap
• Subordinated Swap Risk
• " Total Return Swap " or " total rate of return swap " (TRS or TRORS )
• Currency swap
• Interest rate swap and related specialty shapes, such B.Constant maturity swaps

In addition, there are other swaps, such as derivatives on weather patterns and commodity swaps.

Also with any conventional forward contract is exchanged. The difference between the swap is that there is only a single exchange appointment with the futures market generally. In addition, it comes with a swap in any case to physical deliveries.

Swap policy

The swap policy is an external economic approach of monetary policy to influence the money supply and interest rate swaps with an economy can. Imports and exports money money can be made more or less attractive by changing the official swap rates of national banks. So, unwanted foreign exchange transactions Disabled and desired transactions are encouraged. In addition, the exchange rate and therefore the money supply of the country is affected. The money supply of a country is also regulated by raising liquidity or liquidity absorption.

In the wake of the financial crisis from 2007 the end of 2007 had initially been limited term foreign currency swap agreements between central banks. The European Central Bank ( ECB), the U.S. Federal Reserve, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank have announced in October 2013 to set up this swap agreement on a permanent basis.