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 ... 
Bond Market Association (BMA) Swap
A type of swap arrangement in which two parties agree to exchange ...

Investing Basics
How Are Interest Rate Swaps Valued?
When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps. 
Investing
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. 
Professionals
Interest Rate and Equity Swaps
CFA Level 1  Interest Rate and Equity Swaps. Learn the components of plain vanilla interest rate swaps and equity swaps. Contains sample calculations finding the payments for each swap. 
Trading Strategies
Interest Rate Swaps Explained
Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows. 
Investing Basics
Different Types of Swaps
Investopedia explores the most common types of swap contracts. 
Professionals
Currency Swaps
CFA Level 1  Currency Swaps. Discusses the features of a currency swap. Learn how comparative advantage affects the payments made during a swap agreement. 
Investing
How To Read Interest Rate Swap Quotes
Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes 
Professionals
Swaps
CFA Level 1  Swaps. Learn how swaps can change the characteristics of assets or liabilities. Discusses the cash flows of interest rate and currency swaps. 
Investing Basics
Managing Interest Rate Risk
Interest rate risk stems from the possibility that an interestbearing assetâ€™s value will change due to changing interest rates. 
Professionals
Swap Markets and Contracts
CFA Level 1  Swap Markets and Contracts. Learn the basics of swaps, including how they are used and settled. Includes various methods for terminating a swap contract.

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 >> 
What would motivate an entity to enter into a swap agreement?
Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... 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 >>