Substitution Swap
A swap that is carried out by trading a fixed-income security for a higher yielding bond with similar features. Investopedia Says:
The two securities being swapped have similar coupon rates, maturity dates, call features, credit quality, etc.
Investors will most often participate in substitution swaps when they believe there is a temporary discrepancy in bond prices due to market disequilibrium. Related Terms:
Bond Swap
Callable Bond
Coupon Rate
Credit Rating
Maturity Date
Swap
Workout Period
Yield |