DEFINITION of 'LIBORinArrears Swap'
A swap in which the interest paid on a particular date is determined by that date's interest rate rather than the interest rate of the previous payment date. A swap entails the exchange of one security for another in order to change the maturity (in the case of bonds), the quality of issues (bonds or stocks), or in response to changing investment objectives. A LIBORinarrears swap is a type of swap where each payment is based upon the LIBOR at the end of the payment period. This is in contrast to a traditional LIBOR swap where the interest is based on the beginning or the original interest period. Also called inarrears swap, swapinarrears, reset swap, and arrears swap.
BREAKING DOWN 'LIBORinArrears Swap'
LIBOR refers to the London Interbank Offered Rate, and is the interest rate at which banks can borrow funds from other banks in the Eurocurrency market. It is the world's most widely used shortterm interest benchmark. The LIBORinarrears structure was introduced in the mid1980s to enable investors to take advantage of potentially falling interest rates. It is a strategy used by investors and borrowers who are directional on the interest rates and who believe they will fall. Once the rate is defined, the rate is applied retroactively (in "arrears") to that period.

Rate Anticipation Swap
A type of swap in which bonds are exchanged according to their ... 
Swap
A derivative contract through which two parties exchange financial ... 
Swap Rate
The rate of the fixed portion of a swap as determined by its ... 
Substitution Swap
An exchange that is carried out by trading a fixedincome security ... 
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 ...

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. 
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
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. 
Investing
What Warren Buffet Calls "Weapons of Mass Destruction": Understanding the Swap Industry
A full analysis of how the swap industry works. 
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. 
Forex Education
Currency Swap Basics
Find out what makes currency swaps unique and slightly more complicated than other types of swaps. 
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. 
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. 
Investing Basics
Different Types of Swaps
Investopedia explores the most common types of swap contracts.

Can individual investors profit from interest rate swaps?
Find out how individual investors can speculate on interest rate movements through interest rate swaps by trading fixed rate ... 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 >> 
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 >> 
How do companies benefit from interest rate and currency swaps?
An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... 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 >> 
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 >>