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Swaps are contracts to exchange a cash flow related to the debt obligation of two counter parties.
The main instruments are interest rate, commodity ,currency and equity swaps.
Like forwards, swaps are bilateral agreements, designed to achieve specified risk management objectives. Negotiated privately between two parties, they are invariably OTC 1980s, for a number of reasons.
Major financial reforms in the developed countries together with financial innovation, has increased the demand for swaps which attracts more users.
It is also a means of freeing up capital because it is moved off-balance sheet, banks also have to set aside capital for off-balance sheet activity.
4 Comments. Leave new
Language is very difficult to understand.Tell me about this term ‘swap’ in a simpler way..
Good work but more information required..!
I didn’t understand.. Short and vague.. Could’ve improved
Not at all statisfactory 🙁
Not expected from you 😀
I have read youre blogs but this is somthing like where is the introduction of conclusion 🙁 . 😀 it was just a definition that we can easily find from internet easily 🙂
Hoping for your come back good work 😀