SWAP (or a two-tiered currency exchange transaction)

Swap is the simultaneous conclusion of two currency exchange transactions. Swap consists of combining the Spot and Forward transactions (buying one currency today, you agree at the same time to resell it at a future date at a specified price). Swap comprises two connected transactions - the Spot transaction concluded today (Currency A is exchanged for Currency B), and the Forward transaction, which is concluded today, but settled at a future date (Currency B is exchanged for Currency A). The Swap deal enables you to utilize temporarily one currency instead of another and then reverse the exchange at a predetermined exchange rate.

For example, you own Currency A, but need Currency B for one month. You engage in a Swap transaction selling currency A for currency B, simultaneously agreeing to repurchase Currency A for Currency B after one month at a fixed rate. Usually Swap transactions are used to optimize the cash flow of the business, as well as in various structured transactions.