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Fixed-For-Floating Swap
An advantageous arrangement between two parties (counterparties), in which one party pays a fixed rate, while the other pays a floating rate. Investopedia Says:
To understand how each party would benefit from this types of arrangement, consider a situation where each party has a comparative advantage to take out a loan at a certain rate and currency. For example, Company A can take out a loan with a one-year term in the U.S. for a fixed rate of 8% and a floating rate of Libor + 1% (which is comparatively cheaper, but they would prefer a fixed rate). On the other hand, Company B can obtain a loan on a one-year term for a fixed rate of 6%, or a floating rate of Libor +3%, consequently, they'd prefer a floating rate.
Through an interest rate swap, each party can swap its interest rate with the other to obtain its preferred interest rate
Note that swap transactions are often facilitated by a swap dealer, who will act as the required counterparty for a fee. Related Terms:
Arrears Swap
Bank Bill Swap Bid Rate - BBSY
Bond Market Association (BMA) Swap
Currency Swap
Fixed-For-Fixed Swap
Interest Rate Swap
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