In common practice, no up-front fees are paid to enter a swap agreement. However, in the early days of swaps, such fees were at times paid by companies to dealers that arranged these transactions. Up-front fees were small- almost less than 1% of the notional principal amount of the swap.
For example, a $10 million-notional swap, might have cost $100,000. In present-day swap transactions which involve payment of up-front fees, the fees are made for the purpose of reducing (writing down) the fixed rate on the swap from the perspective of a fixed-rate payer, and for the purpose of increasing (writing up) that rate from the viewpoint of a fixed-rate receiver.
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