Forward Swap

AAA

DEFINITION of 'Forward Swap'

A swap agreement created through the synthesis of two swaps differing in duration for the purpose of fulfilling the specific time-frame needs of an investor. Also referred to as a "forward start swap," "delayed start swap," and a "deferred start swap."

INVESTOPEDIA EXPLAINS 'Forward Swap'

For example, if an investor wants to hedge for a five-year duration beginning one year from today, this investor can enter into both a one-year and six-year swap, creating the forward swap that meets the needs of his or her portfolio. Sometimes swaps don't perfectly match the needs of investors wishing to hedge certain risks.

RELATED TERMS
  1. Amortizing Swap

    An exchange of cash flows, one of which pays a fixed rate of ...
  2. Formula Method

    A technique for calculating termination payments on a prematurely ...
  3. Swap Transferring Risk With Participating ...

    A specific type of hedging technique. STRIPEs combine interest ...
  4. Interest Rate Swap

    An agreement between two parties (known as counterparties) where ...
  5. Currency Swap

    A swap that involves the exchange of principal and interest in ...
  6. Swap Rate

    The rate of the fixed portion of a swap as determined by its ...
RELATED FAQS
  1. How does the foreign-exchange market trade 24 hours a day?

    The forex market is the largest financial market in the world, trading around $1.5 trillion each day. Trading in the forex ... Read Full Answer >>
  2. If a long call is owned on the record date of a stock, is the owner of the option ...

    The owner of a long call for a stock is entitled to a dividend only if the option is exercised prior to the ex-dividend date, ... Read Full Answer >>
  3. How are swap agreements financed?

    Since swap agreements involve the exchange of future cash flows and are initially set at zero, there is no real financing ... Read Full Answer >>
  4. What are the risks involved with swaps?

    The main risks associated with interest rate swaps, which are the most common type of swap, are interest rate risk and counterparty ... Read Full Answer >>
  5. How can an investor profit from the cyclical nature of the electronics sector?

    An investor can profit from the cyclical nature of the electronics sector in two ways. He can employ sector rotation, shifting ... Read Full Answer >>
  6. What does negative vega mean for credit spreads?

    Greek vega measures an option's sensitivity with respect to a change in the underlying asset's volatility. The vega of an ... Read Full Answer >>
Related Articles
  1. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  2. Forex Education

    Forex: Gauging Forex Market Sentiment With Open Interest

    Examining open interest on currency futures can help you confirm the strength of a trend in forex market sentiment.
  3. Mutual Funds & ETFs

    The Top 3 Silver ETFs

    Like any tradable asset, silver and silver ETF prices are governed by the fundamental market economic forces of supply and demand.
  4. Options & Futures

    How To Trade Orange Juice Options

    How do orange juice options work and which factors determine the orange juice valuations? Here's a sneak peak into the world of orange juice options.
  5. Active Trading Fundamentals

    Invest In Gold Through ETFs

    The mystique of the yellow metal captivates market players seeking hedges against inflationary pressure, safe haven in turbulent times and opportunities for speculative trading opportunities. ...
  6. Forex Strategies

    An Introduction To Trading Forex Futures

    We explain what forex futures are, where they are traded, and the tools you need to successfully trade these derivatives.
  7. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.
  8. Active Trading Fundamentals

    Where And How Should You Make Your First Trade?

    New traders should enter markets that offer the greatest opportunity for learning their craft while keeping risk at a minimum.
  9. Options & Futures

    Why Is Best Buy Stock So Volatile?

    We look at why BBY has been so volatile in the past and whether this trend is likely to continue or abate in the future.
  10. Investing Basics

    What is a Stock Option?

    An employee stock option is a right given to an employee to buy a certain number of company stock shares at a certain time and price in the future.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center