Glossary of Municipal Securities Terms

SWAP

(1) A generic term used to describe a broad range of derivative products, including but not limited to interest rate swap contracts. See: DERIVATIVE; INTEREST RATE SWAP CONTRACT.

(2) A sale of a security and the simultaneous purchase of another security for purposes of enhancing the investor’s holdings. The swap may be used to achieve desired tax results, to gain income or principal, or to alter various features of a bond portfolio, including call protectiondiversification or consolidation, and marketability of holdings. Compare: TAX SWAP.

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