An interest rate swap that involves the future exchange of two series of cash flows. This swap allows hedgers to arrange a swap in advance, i.e., before it becomes actually required. It also helps borrowers and investors to alter cash flows in anticipation of future movements in interest rates or the yield curve. Furthermore, this swap can be used to convert a fixed interest rate to a floating interest rate, or to protection the holder against changes in interest rates until a fixed liability or asset is arranged, in which case the holder can offset it with another swap (mirror swap) or terminate it altogether.
It is also known as a forward starting interest rate swap.
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