INTEREST-RATE SWAP

interest-rate swap.An agreement to exchange interest receipts or interest-payment obligations,

usu. to adjust one’s risk exposure, to speculate on interest-rate changes, or to convert an instrument or obligation from a fixed to a floating rate — or from a floating to a fixed rate. • The parties to such an agreement are termed “counterparties.” generic swap.See plain-vanilla swap.

plain-vanilla swap.A typical interest-rate swap that involves one counterparty’s paying a fixed interest rate while the other assumes a floating interest rate based on the amount of the principal of the underlying debt. • The underlying debt, called the “notional” amount of the swap, does not change hands — only the interest payments are exchanged. — Also termed generic swap.

[Blacks Law 8th]