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. Interest Rate Swap

    An agreement between two parties (known as counterparties) where ...
  4. Forward Swap

    A swap agreement created through the synthesis of two swaps differing ...
  5. Credit Default Swap - CDS

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

    A swap that involves the exchange of principal and interest in ...
RELATED FAQS
  1. In what manner will a recession likely affect the marginal-propensity-to-save rate ...

    The marginal propensity to save, or MPS, rises in most, though not all, recessions. This makes perfect sense on an individual ... Read Full Answer >>
  2. Why would a country's gross domestic product (GDP) and gross national income (GNI) ...

    A country’s gross domestic product, or GDP, and gross national income, or GNI, are likely to differ considerably because ... Read Full Answer >>
  3. While closely related, how do gross domestic product (GDP) and gross national income ...

    Gross domestic product, or GDP, and gross national income, or GNI, are the two most important economic indicators that measure ... Read Full Answer >>
  4. How does the neoclassical growth theory predict real GDP?

    Neoclassical growth theory predicts real gross domestic product (GDP) through measures of total factor productivity, capital, ... Read Full Answer >>
  5. What do banks do to control the bank reserve?

    While all banks are required to maintain a specific amount of bank reserves, the banks themselves do not control the minimum ... Read Full Answer >>
  6. How is abatement cost accounted for on financial statements?

    Abatement costs are accounted for on a company's financial statements through increases in either cost of goods sold or operational ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  2. Options & Futures

    Are Derivatives Safe For Retail Investors?

    These vehicles have gotten a bad rap in the press. Find out whether they deserve it.
  3. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  4. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  5. Active Trading

    How Companies Use Derivatives To Hedge Risk

    Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
  6. Economics

    Cashing In On Macroeconomic Trends

    Learn to identify the things that may impact your investments down the road.
  7. Economics

    Is Texas The Future Of America?

    The top three fastest-growing cities are located in Texas and 20% of jobs created between 2009 and 2014 were in the Lone Star State.
  8. Economics

    Explaining Demographics

    Demographics is the study and categorization of people based on factors such as income level, education, gender, race, age, and employment.
  9. Economics

    The Most Likely Outcome For Greece

    After more than five years of a Greek drama, most of us have become fatigued with hearing about Greece’s debt problems, the one issue that won’t go away.
  10. Economics

    How Does a Company Use Raw Materials?

    Raw materials are the basic components of a finished product.

You May Also Like

Hot Definitions
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  2. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  3. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!