interest rate swap agreement definition
Introduction. An interest rate swap is a contractual agreement between two counterparties to exchange cash flows on particular dates in the future. There are two types of legs (or series of cash flows). A fixed rate payer makes a series of fixed payments and at the outset of the swap, these cash flows are known.o value a swap, the present value of cash flows of each leg of the transaction must be determined. In an interest rate swap, the fixed leg is fairly straightforward since the cash flows are specified by the coupon rate set at the time of the agreement.