This article needs break even inflation rate investopedia forex citations for verification. In financial accounting, an asset swap is an exchange of tangible assets for intangible assets or vice versa.
Since it is a swap of assets, the procedure takes place on the active side of the balance sheet and has no impact on the latter in regard to volume. In finance, the term asset swap has a particular meaning. An example of this is where an institution swaps the cash flows on a U. An asset swap enables an investor to buy a fixed rate bond and then hedge out the interest rate risk by swapping the fixed payments to floating. In doing so the investor retains the credit risk to the fixed-rate bond and earns a corresponding return. An asset swap is the swap of a fixed investment, like a bond that will yield guaranteed coupon payments, for a floating investment, i.
It has a similar structure to a plain vanilla swap, but the underlying of the swap contract is different. There are several variations on the asset swap structure with the most widely traded being the par asset swap. Other types include the market asset swap and the cross-currency asset swap. The most common and standard one is par asset swap. The asset swap buyer purchases a bond from the asset swap seller in return for a full price of par.