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Derivatives

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  • April 6, 2021
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Forward Swap Agreement

An agreement between two parties to exchange interest rates, asset performances or prices or almost any economic values on a preset date in the future. This swap allows investors to hedge risk expected to arise at a future date. For example, this agreement may involve swapping interest rates beginning in three months and lasting for a specific period of time (say six months). Such a swap could be an interest rate swap or a cross-currency swap in which payments are put off till a specified time in the future. That is, the parties to the swap don’t begin exchanging interest payments at the trade date, but rather specify a value date some time in the future.


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