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Interest Rate Swap

Interest rate swap refers to a contract between the two parties to exchange a series of cash flows within a certain period of time in the future. These cash flows are based on the same currency and only exchange interest, not principal. Interest rate swaps usually involve the exchange of a fixed interest rate for a floating rate, or the exchange of a floating interest rate for a fixed rate. If client paid Fixed Rate and receives Floating Rate, client can hedge its interest rate risk if the current market interest rates keep increasing. If client paid Floating Rate and receives Fixed Rate, client will benefit if market interest rate goes down. Interest Rate Swap allows clients to manage or hedge their fixed or floating assets and liabilities.

Cross Currency Swap (CCS)

A CCS is an agreement between two parties to exchange interest payments, with or without an initial and final exchange of principal value, in two different currencies.  During the life of the CCS, each party pays interest (in the currency of the principal received) to the other, while at the maturity of the swap, the parties make a final exchange of the principal amounts, reversing the initial exchange at the same spot rate. In practice, the beginning and end of the period can choose whether to exchange the principal based on demand. The interest exchange can be floating to fixed, floating to floating, fixed to fixed exchange.