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Swap

A swap is an agreement to exchange future cash flows. For example, one company may agree to swap the difference between a fixed interest rate and a floating (Libor) interest rate so that its future cash flows be coherent with its future debt obligations. This is also referred to as a financial swap. Because the companies swap only the interest rate based on a notional principal, it does not involve any payment of principal, only of the difference, if any, in the interest rates on the agreed payment dates.
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