Swap
Exchange of cash flows or financial instruments between two parties.
Detailed Description
Swap
What is a swap?
A swap is a financial derivative contract where two parties exchange cash flows or financial instruments over a specified period.
What are the common types of swaps?
Common types include interest rate swaps, currency swaps, commodity swaps, credit default swaps, and total return swaps.
How do swaps help in risk management?
Swaps allow companies to hedge against fluctuations in interest rates, currencies, and commodity prices, stabilizing cash flows.
What risks are associated with swaps?
Risks include counterparty risk, market risk, liquidity risk, and operational risk.
What regulatory frameworks govern swaps?
Key regulations include the Dodd-Frank Act in the U.S. and the European Market Infrastructure Regulation (EMIR) in the EU.