DEFINITION of 'Reversible Swap'
An exchange of cash flows that allows one counterparty to use a swaption to switch the payor and payee of the fixed and floating rate income streams. The counterparty who is making fixed payments and receiving floating payments would begin receiving fixed payments and making floating payments, and vice versa. A reversible swap consists of an interestrate swap plus a swaption for two times the notional principal amount of the interestrate swap. If the notional principal amount of the interestrate swap was $100,000, the swaption would be for $200,000.
BREAKING DOWN 'Reversible Swap'
Reversible swaps are a type of interest rate swap. They allow investors to hedge against or speculate on possible changes in interest rates. One situation when a reversible swap would be desirable is when political instability makes interest rates especially unpredictable. Other types of financial instruments investors might use to manage interestrate risk include plain vanilla swaps, constant maturity swaps, airbag swaps, forward rate agreements and many others.

Asset Swap
Similar in structure to a plain vanilla swap, the key difference ... 
Callable Swap
An exchange of cash flows in which one counterparty makes payments ... 
Call Swaption
A type of option between two parties that can be exercised on ... 
Putable Swap
An exchange of cash flows in which one counterparty makes payments ... 
Delayed Rate Setting Swap
An exchange of cash flows, one of which is based on a fixed interest ... 
Bond Market Association (BMA) Swap
A type of swap arrangement in which two parties agree to exchange ...

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. 
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'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. 
Trading Strategies
Interest Rate Swaps Explained
Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows. 
Investing Basics
Different Types of Swaps
Investopedia explores the most common types of swap contracts. 
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. 
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. 
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. 
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 
Forex Education
Currency Swap Basics
Find out what makes currency swaps unique and slightly more complicated than other types of swaps.

What would motivate an entity to enter into a swap agreement?
Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... 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 >> 
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 >> 
How are swap agreements financed?
Learn how swap agreements are now cleared by swap execution facilities and require the use of collateral margin to hold, ... Read Answer >> 
How do I use a rollercoaster swap?
A rollercoaster swap is the name for a swap (the exchange of one security for another) with a notional principal that differs ... Read Answer >>