Macroeconomic Swap

AAA

DEFINITION of 'Macroeconomic Swap'

A type of derivative designed to help companies whose revenues are closely correlated with business cycles to reduce their business-cycle risk. In a macroeconomic swap, also called a macro swap, a variable stream of payments based on a macroeconomic indicator is exchanged for a fixed stream of payments. The exchange occurs between an end user and a macro swap dealer.

INVESTOPEDIA EXPLAINS 'Macroeconomic Swap'

Macroeconomic swaps were introduced to the market in the early 1990s. Types of indicators that may be used include, but are not limited to, the Consumer Confidence Index, the Wholesale Price Index, inflation rates, unemployment rates, gross national product and gross domestic product. In most types of swaps, the underlying asset can be traded, but this is not true for macroeconomic swaps.

RELATED TERMS
  1. Reverse Swap

    An exchange of cash flow streams that undoes the effects of an ...
  2. Debt For Bond Swap

    A debt swap involving the exchange of a new bond issue for similar ...
  3. Credit Default Swap - CDS

    A swap designed to transfer the credit exposure of fixed income ...
  4. Currency Swap

    A swap that involves the exchange of principal and interest in ...
  5. Forward Swap

    A swap agreement created through the synthesis of two swaps differing ...
  6. Interest Rate Swap

    An agreement between two parties (known as counterparties) where ...
Related Articles
  1. Economic Indicators That Do-It-Yourself ...
    Investing Basics

    Economic Indicators That Do-It-Yourself ...

  2. Are Derivatives Safe For Retail Investors?
    Options & Futures

    Are Derivatives Safe For Retail Investors?

  3. An Introduction To Swaps
    Options & Futures

    An Introduction To Swaps

  4. Explaining The World Through Macroeconomic ...
    Options & Futures

    Explaining The World Through Macroeconomic ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center