What is a 'FixedForFloating Swap'
A fixedforfloating swap is an advantageous arrangement between two parties (counterparties), in which one party pays a fixed rate, while the other pays a floating rate.
BREAKING DOWN 'FixedForFloating Swap'
To understand how each party would benefit from this type of arrangement, consider a situation where each party has a comparative advantage to take out a loan at a certain rate and currency. For example, Company A can take out a loan with a oneyear term in the U.S. for a fixed rate of 8% and a floating rate of Libor + 1% (which is comparatively cheaper, but they would prefer a fixed rate). On the other hand, Company B can obtain a loan on a oneyear term for a fixed rate of 6%, or a floating rate of Libor +3%, consequently, they'd prefer a floating rate.
Through an interest rate swap, each party can swap its interest rate with the other to obtain its preferred interest rate
Note that swap transactions are often facilitated by a swap dealer, who will act as the required counterparty for a fee.

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What are interest rate swaps on the OTC market?
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Can individual investors profit from interest rate swaps?
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What is an absolute rate?
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Do interest rate swaps trade on the open market?
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How do companies benefit from interest rate and currency swaps?
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What would motivate an entity to enter into a swap agreement?
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