Definition of 'Swap'

Traditionally, the exchange of one security for another to change the maturity (bonds), quality of
issues (stocks or bonds), or because investment objectives have changed. Recently, swas
have grown to include currency swas and interest rate swas.
!f firms in searate countries have comarative advantages on interest rates, then a swa could
benefit both firms. "or examle, one firm may have a lower fixed interest rate, while another has
access to a lower floating interest rate. These firms could swa to take advantage of the lower
rates.