Interest Rate Swaps are used to hedge the risk of adverse movements in interest rates. An interest rate swap is a contract between two counterparties, where one counterparty agrees to make payments based on the value of a set index or rate to the other party, who makes payments based on some other reference index or rate. The first reference point for an interest-rate swap can be the London Interbank Offered Rate (LIBOR), which is a benchmark for banks' daily interbank lending rates.Interest Rate Swaps (IRSs), or basis swaps, are financial derivatives that allow two parties to exchange the interest rate risk of one debt for another. These agreements can be used by investors and corporations to manage their exposure to interest-rate volatility, particularly when a borrower has floating-rate debt.Interest Rate Swaps (IRS) are used by companies to manage their interest rate risk exposure. A company with a floating-rate debt can enter into an IRS to exchange one stream of future floating rate payments for another based on a specified principal amount and fixed interest rate.
