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Uses of interest rate swap

Prateek Goswami (Article) (74 Points)

30 July 2011

Please clarity the uses of Interest rate swap.

I am verymuch cofused on this topic.

Thanks in advance

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2 Replies

Mohammed (CS, Mcom, LLB) (852 Points)
Replied 30 July 2011

An agreement between two parties (known as counterparties) in which one stream of future interest payments is exchanged for another stream, based on a specified principal amount. Interest rate swaps often involve exchanging a fixed payment for a floating payment, which is linked to an interest rate. A company typically uses interest rate swaps to limit or manage its exposure to fluctuations in interest rates or to obtain a marginally lower interest rate than it would have been able to get without the swap.