SWAP

A swap can be defined as barter or an exchange. A swap is contract whereby parties agree to exchange obligations that each of them have under their respective underlying contracts or we can say a swap is an agreement between two or more parties to exchange sequence of cash flows over a period in future . The parties that agree to swap are known as counterparties. Swap is an agreement between two counterparties to exchange two streams of cash flows—the parties "swap" the cash flow streams. Those cash flow streams can be defined in almost any manner. In other words: In a swap, two counterparties agree to a contractual arrangement wherein they agree to exchange cash flows at periodic intervals