index swap

Definition

Hedging arrangement in which one party exchanges one cash flow with another party's cash flow on specified dates for a specified period. These cash flows are associated with a debt index, equity (stock) index, or any asset or price index. An index swap is a variant of the conventional fixed-rate swap, and its terms may range from three months to a year or more.

Use index swap in a sentence

If you want to find a good way to protect your investment you should try to take on an index swap.

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You should try and make sure that you follow any index swap so that you are prepared to adjust with it.

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The index swap was designed to be mutually beneficial as the timing of the receipt of the cash flows benefited each other.

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