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How Does a ‘Swap’ Derivative Function?

A swap is an agreement between two parties (counterparties) to exchange future cash flows based on two different underlying assets or rates over a specified period. The most common type is an interest rate swap, where one party exchanges fixed interest payments for floating interest payments.

Swaps are primarily used to hedge against interest rate or currency risk or to gain exposure to different markets.

Why Is Variation Margin Typically Settled in Cash, While Initial Margin Can Be Non-Cash Assets?
What Is a Swap Curve and How Is It Used?
How Does the Volatility of the Underlying Asset Affect the Choice between Physical and Cash Settlement?
How Can a Utility Token Indirectly Generate Cash Flows for Its Holders?