Swaps
Derivative agreements whereby two counterparties agree to exchange cashflows. For example, one party may agree to pay a fixed interest rate, and the other a variable rate, linked to some benchmark. When payment is due, the two cashflows will be netted out, so only one party will pay the other. As with other derivatives, swaps can be used for hedging (against rising interest rates, for example) or for speculation. See also credit default swaps.
