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Interest rate swap

A derivative where two parties exchange interest payments, typically swapping a fixed rate for a floating rate on the same notional amount.

In an interest rate swap, one party pays a fixed rate and receives a floating rate, while the other does the reverse, on an agreed notional that is never itself exchanged.

Swaps are the main tool for managing interest rate risk, letting borrowers and investors convert fixed exposure to floating or the other way round.

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