| Swap |
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Traditionally,
the exchange of one security for another to change the maturity (bonds),
or quality of issues (stocks or bonds), or because investment objectives
have changed. Recently, swaps have grown to include currency swaps
and interest rates swaps.
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If
firms in separate countries have comparative advantages on interest
rates then a swap could benefit both firms. For example one firm may
have a lower fixed interest rate while another has access to a lower
floating interest rate, these firms could swap to take advantage of
the lower rates. |
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