Definition for : Interest rate swap, IRS

An Interest rate Swap contract consists in exchanging two types of borrowings (different currencies, fixed-rate versus floating rate, etc), usually without the actual exchange of the principals. The most common Interest rate Swap contract indicates the fixed Interest rate that will equate the Present value of the fixed-rate payments (see Fixed-rate debt security) with the Present value of the floating-rate payments (see Floating-rate debt security). An Interest rate Swap can be seen as a portfolio of long-term forward rate agreements.
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