Putable Swap

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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.

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RELATED FAQS
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    An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Full Answer >>
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