The Course

Swaps, from the ground up

A free, plain-English course on swaps — the contracts where two parties exchange a stream of cash flows over time. Each lesson is short, uses worked examples, and ends with a quick knowledge check.

1. 1 What Is a Swap? An agreement between two parties to exchange a series of cash flows over time — most often a fixed rate for a floating one.
2. 2 Interest Rate Swaps The most common swap: one side pays a fixed rate, the other a floating rate, to reshape its interest-rate exposure.
3. 3 How Swap Payments Work Notional, the two legs, and netting — how each period’s payment is calculated and why only the difference changes hands.
4. 4 Currency Swaps Exchanging principal and interest in two different currencies to fund or hedge a cross-border position.
5. 5 Credit Default Swaps Insurance on a borrower: the buyer pays regular premiums, and the seller pays out if the borrower defaults.
6. 6 Why Use Swaps? Converting exposures and hedging interest-rate, currency, and credit risk — and the institutions that rely on swaps.
7. 7 Swap Risk and Common Mistakes Counterparty risk, complexity, and long maturities — the hazards that define swaps, and the lesson of 2008.