Asset swap


Asset swap

An interest rate swap used to alter the cash flow characteristics of an institution's assets in order to provide a better match with its liabilities.

Asset Swap

A swap in which the legs are two investments, one with a fixed return and one with a variable return. For example, two investors could agree to swap bonds, which have guaranteed coupons, and an index fund, which has a return linked to the performance of some index. The counterparties to an asset swap are usually seeking favorable cash flows to fulfill their investment goals. While it is not required, debt obligations are usually at least one of the assets that are swapped.