Swap Bank

AAA

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.

INVESTOPEDIA EXPLAINS '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. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
  2. Swaption (Swap Option)

    The option to enter into an interest rate swap. In exchange for ...
  3. Swap Spread

    1. The difference between the negotiated and fixed rate of a ...
  4. Swap

    Traditionally, the exchange of one security for another to change ...
  5. Swap Dealer

    An individual who acts as the counterparty in a swap agreement ...
  6. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position ...
Related Articles
  1. An Introduction To Swaps
    Options & Futures

    An Introduction To Swaps

  2. Volatility - The Birth Of A New Asset ...
    Options & Futures

    Volatility - The Birth Of A New Asset ...

  3. How Companies Use Derivatives To Hedge ...
    Active Trading

    How Companies Use Derivatives To Hedge ...

  4. All About Liquid Commodities
    Options & Futures

    All About Liquid Commodities

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. 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. ...
  3. Due Diligence - DD

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

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. 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 ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center