What is CURRENCY SWAP?

An OVERTHECOUNTER SWAP involving the exchange of two currencies. A typical currency swap involves the exchange of a fixed payment in one currency for a floating payment in a second currency, although the exchange of two fixed or two floating payments can also be arranged. Currency swaps involve the initial and final exchange of principal, which results in a high degree of CREDIT RISK. Also known as CROSS CURRENCY SWAP. See also CURRENCY DERIVATIVE.

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