swap

(FINANCE) a type of financial derivative which two parties "swap," or exchange, the streams of income (or payments) from two different sources. The actual instrument is created by a third party, such as an investment bank. The most familiar version of the swap is the interest rate swap, in which the holder of a fixed rate loan and the holder of an adjustable rate loan agree to exchange revenue streams. The variety of swaps available is massively greater than with options or futures; essentially, swaps exist for every arbitrage opportunity that any combination of markets provides; the market for swaps is huge.