Swaps

Discipline: Economics

Swaps are financial contracts that allow two parties to exchange a specified amount of a security, and to give back the originally swapped amounts on a future date.

There are different kinds of swaps, such as equity swap, interest rate swap, currency swap, and stock swap.

Market participants engage in swap contracts in order to avoid transaction costs, dividend taxes. Swaps are also used for hedging or speculative purposes.

Also see: derivatives, futures, options

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