Interest Rate Swap

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For example, a swap participant may agree to pay a fixed rate of 10% on $10 million every year for the next five years. In exchange, the participant will receive a six-month LIBOR rate for the same amount of money for the same period of time. In effect, the swapper has traded a fixed-rate payment for a floating-rate payment...
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In effect, the swapper has traded a fixed-rate payment for a floating-rate payment. Note that the two parties simply agree to exchange interest payments; there is no exchange of principal, nor is there any physical exchange of securities. In fact, there may not even be an actual security on either side...
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GE Toys For many years, Great Eastern Toys has not hedged its transactions and has been very lucky that there were no detrimental changes exchange rates. But now, due to the currency crisis in East Asia, the firm is reconsidering its strategy...	2 / 555
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