DEFINITION of 'Callable Swap'
An exchange of cash flows in which one counterparty makes payments based on a fixed interest rate, the other counterparty makes payments based on a floating interest rate and the counterparty paying the fixed interest rate has the right to end the swap before it matures.
An investor might choose a callable swap if interest rates are expected to change in a way that would adversely affect the fixed rate payer.
BREAKING DOWN 'Callable Swap'
The additional features of a callable swap make it more expensive than a plain vanilla interest rate swap  the fixed rate payer will pay a higher interest rate and possibly might have to pay additional funds to purchase the option. The opposite of a callable swap is a putable swap, which allows the floating interest rate payer to end the swap early.

Putable Swap
An exchange of cash flows in which one counterparty makes payments ... 
Extendable Swap
An exchange of cash flows between two counterparties, one of ... 
Delayed Rate Setting Swap
An exchange of cash flows, one of which is based on a fixed interest ... 
Reversible Swap
An exchange of cash flows that allows one counterparty to use ... 
Asset Swap
Similar in structure to a plain vanilla swap, the key difference ... 
Swap Rate
The rate of the fixed portion of a swap as determined by its ...

Markets
What's an Interest Rate Swap?
An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount. 
Investing
Interest Rate Swaps Explained
Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows. 
Investing
Different Types of Swaps
Investopedia explores the most common types of swap contracts. 
Managing Wealth
How To Read Interest Rate Swap Quotes
Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes 
Trading
Managing Interest Rate Risk
Interest rate risk stems from the possibility that an interestbearing asset’s value will change due to changing interest rates. 
Trading
Currency Swap Basics
Find out what makes currency swaps unique and slightly more complicated than other types of swaps. 
Investing
Introduction To Counterparty Risk
Unlike a funded loan, the exposure from a credit derivative is complicated. Find out everything you need to know about counterparty risk. 
Trading
Hedging With Currency Swaps
The wrong currency movement can crush positive portfolio returns. Find out how to hedge against it. 
Markets
Who is a Counterparty?
The counterparty is the other party in a financial transaction. 
Trading
Managing Interest Rate Risk
Learn which tools you need to manage the risk that comes with changing rates.

What are the risks involved with swaps?
Learn about interest rate risk and counterparty risk for interest rate swap agreements, and understand how the DoddFrank ... Read Answer >> 
Who is the counterparty of a derivative?
Learn about the counterparty to a derivative contract, and how derivative swap agreements traded over the counter have counterparty ... Read Answer >> 
What is an absolute rate?
An absolute rate is easy to understand once you know the basics of an interest rate swap. An absolute rate is the fixed rate ... Read Answer >> 
How do currency swaps work?
Learn about how a currency swap works, including who uses these transactions, and the mechanics and purpose of the different ... Read Answer >> 
How are swap agreements financed?
Learn how swap agreements are now cleared by swap execution facilities and require the use of collateral margin to hold, ... Read Answer >> 
Do interest rate swaps trade on the open market?
Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >>