Interest Rate Swap

An Interest Rate Swap (IRS) is a derivative contract between two counterparties to exchange one stream of future interest payments for another, typically exchanging a fixed-rate payment for a floating-rate payment, without exchanging the underlying principal amount. This financial instrument is primarily used for managing interest rate risk, such as hedging against rising rates or speculating on rate movements, and is the most common type of swap, with a global turnover of trillions of dollars.