DEFINITION of 'Rollercoaster Swap'

A seasonal swap providing flexibility of payments at predetermined periods to best meet the counterparty's cyclical financing needs or other requirements.

BREAKING DOWN 'Rollercoaster Swap'

This swap has fluctuating payments so that the counterparty can match cash flows to transfers, periodic financing obligations or seasonal factors.

For example, an international company that sells lawn mowers might have a keen interest in a rollercoaster swap because it can match swap payments with the seasonal demand for lawn mowers.

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RELATED FAQS
  1. 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 >>
  2. Who is the counterparty of a derivative?

    Learn about the counterparty to a derivative contract, and how derivative swap agreements traded over the counter have counterparty ... Read Answer >>
  3. 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 >>
  4. 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 >>
  5. What are some risks a company takes when entering a currency swap?

    Read about the risks associated with performing a currency swap, including counterparty credit risk in the event that one ... Read Answer >>
  6. What are the risks involved with swaps?

    Learn about interest rate risk and counterparty risk for interest rate swap agreements, and understand how the Dodd-Frank ... Read Answer >>
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