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.

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 ... 
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 ... 
Interest Rate Swap
An agreement between two parties (known as counterparties) where ... 
Replacement Swap
A substitute for a swap arrangement that is terminated before ...

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When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps. 
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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. 
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Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows. 
Investing Basics
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Investopedia explores the most common types of swap contracts. 
Investing
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Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes 
Investing Basics
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Interest rate risk stems from the possibility that an interestbearing assetâ€™s value will change due to changing interest rates. 
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Unlike a funded loan, the exposure from a credit derivative is complicated. Find out everything you need to know about counterparty risk. 
Forex Education
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Economics
Who is a Counterparty?
The counterparty is the other party in a financial transaction.

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 >> 
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 >> 
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 >> 
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 >> 
What are interest rate swaps on the OTC market?
Learn about interest rate swaps and how they are traded over the counter, and understand the impact of DoddFrank on swaps ... Read Answer >> 
Can bond traders trade on interest rate swaps?
Read about interest rate swaps and why these transactions are performed by institutional actors in the bond market, not individual ... Read Answer >>