A swaps broker is someone who helps investors in trading in interest rate swaps. The process of buying and selling exchange-traded securities involves making multiple trades. This process is usually outlined in a brokerage agreement, which is typically based on a template provided by an introducing broker. A swap broker is responsible for introducing customers to the markets, providing them with quotes and establishing the customer relationship. The purpose of the broker is to help traders make money by offering advice.
Many traders use swaps to hedge their risk. For example, a company that has a floating-rate loan might want to swap into a fixed-rate loan, hoping to manage its exposure to interest rate changes. The other party, on the other hand, might hope for lower interest rates in the future. A swap gives both parties peace of mind, but the process can be complicated and time-consuming. However, with the right guidance, a swaps broker can help you to invest your money wisely.
A swap is a type of derivative contract between two parties. It involves two parties exchanging cash flows from different financial instruments. Unlike options, the cash flows in a swap are not traded directly. Instead, they are exchanged as a contract between the two parties. In most cases, the principal does not change hands. Each leg of a swap is made up of two cashflows. One is fixed and the other is variable, which means that the price of the other is unpredictable.