Swap Spread

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DEFINITION of 'Swap Spread'

1. The difference between the negotiated and fixed rate of a swap. The spread is determined by characteristics of market supply and creditor worthiness.

2. The difference between the swap rate and the lending rate offered through other investment vehicles with comparable characteristics.

INVESTOPEDIA EXPLAINS 'Swap Spread'

Similar to equity spreads, the swap spread adjusts for every contract and the different participating parties.

RELATED TERMS
  1. Spread

    1. The difference between the bid and the ask price of a security ...
  2. Swap Dealer

    An individual who acts as the counterparty in a swap agreement ...
  3. Quality Spread Differential - QSD

    In an interest rate swap, the difference between the interest ...
  4. Swap

    Traditionally, the exchange of one security for another to change ...
  5. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
  6. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position ...
RELATED FAQS
  1. How is spread calculated when trading in the forex market?

    First, remember that in the forex markets investors trade one currency for another. Therefore, currencies are quoted in terms ... Read Full Answer >>
  2. How are swap agreements financed?

    Since swap agreements involve the exchange of future cash flows and are initially set at zero, there is no real financing ... Read Full Answer >>
  3. What are the risks involved with swaps?

    The main risks associated with interest rate swaps, which are the most common type of swap, are interest rate risk and counterparty ... Read Full Answer >>
  4. How can an investor make money from a decline in the electronics sector?

    Speculation methods, such as short selling, futures contracts and put options, offer investors a way to make money from a ... Read Full Answer >>
  5. How can an investor profit from a decline in the aerospace sector?

    Several forms of speculation enable investors to profit from a decline in the aerospace sector. Short selling aerospace stock ... Read Full Answer >>
  6. What are interest rate swaps on the OTC market?

    Interest rate swaps are agreements where counter parties agree to exchange interest rate cash flows based upon the difference ... Read Full Answer >>
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