What Does Swap Mean?

What Does Swap Mean?

Swap is used as a swap and exchange in the sense of a dictionary. In forward markets, swap transactions are known as exchanging debts with fixed or variable interest types.

Swap Rate

There are three types of swap transactions on the market. These; It is money swap, interest swap and cross currency swap. In summary, swap types are as follows; 1. Money swap transactions: Transactions made by the two parties to change a certain amount of currencies at the rates and conditions agreed. 2. Interest rate swap transactions: This is an agreement that changes the interest rates to be calculated under different interest rate conditions on the basis of a principal amount at the agreed dates for the two parties. In this contract, the structure of interest payments of debts in the same currency changes, principal change does not occur. 3) Cross currency swap transactions; Parties that borrow in different currencies and different interest structures fulfill the necessary responsibility by agreeing to realize principal and interest payments on the debt of the other party.

Forex Swap

In Forex markets, swap is known as overnight transportation fee / overnight interest. When calculating Forex swap rates, interest differences between the two countries' currency are taken into consideration. The swap costs are included in all currency pairs traded in the Forex markets. The swap-free forex account type is called "islamic" or "swap-free forex" account. Trading in the Forex market takes place through the electronic trading platform called MetaTrader 4. On this platform, swap rates are shown in US Dollars (USD). But in international markets, swaps can also be expressed on point in other electronic trading platforms. Buying in EURTRY (Euro / TL) is expressed as (long). It means buying Euros and selling TL in return. Selling EURTRY (short) means selling TL and buying TL. Euro policy rate is 0.05 percent and Turkish Lira policy rate is 7.5 percent. For this reason, borrowing TL in return for taking EUR means swap cost.