Glossary of Municipal Securities Terms

INTEREST RATE SWAP CONTRACT OR AGREEMENT

A specific derivative contract entered into by an issuer or obligor with a swap provider to exchange periodic interest payments. Typically, one party agrees to make payments to the other based upon a fixed rate of interest in exchange for payments based upon a variable rate. The swap contract may provide that the issuer will pay to the swap counter-party a fixed rate of interest in exchange for the counter-party making variable payments equal to the amount payable on the variable rate debt. See: FIXED-TO-FLOATING RATE SWAP; FLOATING-TO-FIXED RATE SWAP; INTEREST RATE FLOOR; FORWARD SWAP AGREEMENT; INTEREST RATE CAP. Compare: SWAP.

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