DEFINITION of 'Swap Bank'

A financial institution that acts as an intermediary for interest and currency swaps. The function of these intermediaries is to find counterparties for those who want to participate in swap agreements. The swap bank typically earns a slight premium for facilitating the swap.

BREAKING DOWN 'Swap Bank'

Generally speaking, companies do not directly approach other companies in an attempt to create swap agreements. Instead, swap banks coordinate the swap agreements for companies. In most cases, companies don't even know the identities of their swap counterparties.

RELATED TERMS
  1. Forward Swap

    A swap agreement created through the synthesis of two swaps differing ...
  2. Swap Dealer

    An individual who acts as the counterparty in a swap agreement ...
  3. Reverse Swap

    An exchange of cash flow streams that undoes the effects of an ...
  4. Zero Basis Risk Swap - ZEBRA

    A swap agreement between a municipality and a financial intermediary. ...
  5. Swap

    A derivative contract through which two parties exchange financial ...
  6. Foreign Currency Swap

    An agreement to make a currency exchange between two foreign ...
Related Articles
  1. Managing Wealth

    An In-Depth Look At The Swap Market

    The swap market plays an important role in the global financial marketplace; find out what you need to know about it.
  2. Trading

    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.
  3. Trading

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  4. Trading

    Currency Swap Basics

    Find out what makes currency swaps unique and slightly more complicated than other types of swaps.
  5. 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.
  6. Trading

    Different Types of Swaps

    Investopedia explores the most common types of swap contracts.
  7. 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
  8. Investing

    The Advantages Of Bond Swapping

    This technique can add diversity to your portfolio and lower your taxes. Find out how.
  9. Trading

    Interest Rate Swaps Explained

    Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows.
  10. Trading

    Hedging With Currency Swaps

    The wrong currency movement can crush positive portfolio returns. Find out how to hedge against it.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. When was the first swap agreement and why were swaps created?

    Learn about the history of swap agreements, the first swap agreement between IBM and the World Bank, and how swaps have evolved ... Read Answer >>
  4. Can bond traders trade on interest rate swaps?

    Read about interest rate swaps and why these transactions are performed by institutional actors in the bond market, not individual ... Read Answer >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center