InvestorQ : What is meant by interest rate swaps (IRS) and what is the application of IRS?
Chandralekha Desai made post

What is meant by interest rate swaps (IRS) and what is the application of IRS?

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Rashi Mehra answered.
3 years ago
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Interest rate swaps are agreements where one side pays the other a particular interest rate (fixed or floating) and the other side pays the other a different interest rate (fixed or floating).

Accordingly, swaps are:

Fixed vs Floating swaps

Where one side pays the other a fixed interest rate and the other pays a floating rate determined by some benchmark and reset at fixed time intervals.

Basis swaps

Where the two sides pay each other rates determined by different benchmarks.

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