Interest rate swap
An exchange of payments: one side pays a fixed rate, the other a floating one, both calculated on a common notional amount.
How to read the number
It changes the character of a debt without touching the debt: an issuer with a floater turns a floating stream into a fixed one without buying the issue back.
When the metric lies
The notional never changes hands, yet the obligations on it are entirely real. A position that looks like an exchange of percentages demands cash on a sharp rate move just as ordinary debt would.
Also known as: irs, fixed for floating swap