Putable Swap

AAA

DEFINITION of 'Putable Swap'

An exchange of cash flows in which one counterparty makes payments based on a fixed interest rate, the other counterparty makes payments based on a floating interest rate, and the counterparty paying the floating interest rate (and receiving the fix rate) has the right to end the swap before it matures. An investor might choose a putable swap if interest rates are expected to change in a way that would adversely affect the floating rate payer.

INVESTOPEDIA EXPLAINS 'Putable Swap'

The additional features of a putable swap make it more expensive than a plain vanilla interest rate swap - the floating rate payer will pay a higher interest rate and possibly an early termination fee. The opposite of a putable swap is a callable swap, which allows the fixed interest rate payer to end the swap early.

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. Credit Default Swaps: What Happens In ...
    Insurance

    Credit Default Swaps: What Happens In ...

  2. The Alphabet Soup Of Credit Derivative ...
    Mutual Funds & ETFs

    The Alphabet Soup Of Credit Derivative ...

  3. Credit Default Swaps: An Introduction
    Bonds & Fixed Income

    Credit Default Swaps: An Introduction

  4. An Introduction To Swaps
    Options & Futures

    An Introduction To Swaps

comments powered by Disqus
Hot Definitions
  1. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  2. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  4. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  6. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
Trading Center