How Is a “Swap” Contract Different from a Forward or Futures Contract?

A swap is an agreement between two parties to exchange cash flows over a specified period. Unlike forwards or futures, which involve a single exchange at a future date, a swap involves a series of exchanges.

Swaps are customized, over-the-counter (OTC) contracts, making them similar to forwards in terms of counterparty risk. The most common types are interest rate swaps and currency swaps, used primarily for managing risk or speculation.