DEFINITION of 'Macroeconomic Swap'

A type of derivative designed to help companies whose revenues are closely correlated with business cycles to reduce their business-cycle risk. In a macroeconomic swap, also called a macro swap, a variable stream of payments based on a macroeconomic indicator is exchanged for a fixed stream of payments. The exchange occurs between an end user and a macro swap dealer.

BREAKING DOWN 'Macroeconomic Swap'

Macroeconomic swaps were introduced to the market in the early 1990s. Types of indicators that may be used include, but are not limited to, the Consumer Confidence Index, the Wholesale Price Index, inflation rates, unemployment rates, gross national product and gross domestic product. In most types of swaps, the underlying asset can be traded, but this is not true for macroeconomic swaps.

  1. Forward Swap

    A forward swap is an agreement between two parties to exchange ...
  2. Swap Spread

    A swap spread is the difference between the fixed component of ...
  3. Foreign Currency Swap

    A foreign currency swap is an agreement to exchange currency ...
  4. Swap

    A swap is a derivative contract through which two parties exchange ...
  5. Bilateral Netting

    The process of consolidating swap agreements between two parties ...
  6. Swap Dealer

    A swap dealer is an individual who acts as the counterparty in ...
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