Glossary
/Interest Rate Swap
What is an Interest Rate Swap?
This sounds like complicated Wall Street jargon, but the concept is actually a simple side bet. Two companies agree to swap their loan interest payments. One pays a fixed rate, the other pays a floating rate that changes with the market. No actual loan money changes hands, just the interest cash flows. Big banks and corporations do this to protect themselves if they think the RBI will significantly raise or lower interest rates soon.
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