SWAP

In the case of a pure interest swap, two debtors trade different qualities of interest repayments. These debts are in the same currency. What matters most in the transaction is that different interest payment calculations (fixed vs. variable) are applied to the same principal balance.

In addition, mutual capital demands are not allowed as part of the swap. The point of the swap is to give up an advantage in credit rating in return for a corresponding reward. The one party gets a counter value for giving up its creditworthiness while the other benefits in the form of lower interest payments. A similar concept is applied to currency swaps. In this case, the traded securities are based in different currencies.