Swap is 1) to exchange, give and take; 2) a derivative contract through which two parties exchange financial instruments that agrees to exchange cash flows determined with reference to currencies or interest rates, according to predetermined rules. A Currency Swap is exchanging principal and fixed rate interest payments on a loan in one currency for principal and fixed rate interest payments on an equal loan in another currency. Generally, one cash flow is fixed, while the other is variable based on a benchmark interest rate.
Related Definitions in the Project: The Commercial Definitions
Example Article of the Swap:
The US Federal Reserve is broadening the swap lines it has set up to boost US dollar funding markets to additional countries including large emerging markets such as Brazil and Mexico as well as European nations including Denmark and Sweden. The Fed had already set up similar swap lines with the ECB, the Bank of Japan and the Bank of England. On Thursday, it widened the scope as financial stress due to the coronavirus outbreak has sent the US dollar sharply higher, with global financial institutions scrambling to buy the world’s reserve currency. ... (from FT on 19 March 2020)
