Swap - The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.
Hope that helps,
andersenws
"Youth is the trustee of prosperity." - Benjamin Disraeli
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Joined Apr 2006
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Status: Ousted Member
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A swap rate, in plain english, is just interest paid or charged to the trader from the result of an overnight position. At 5:00 EST (I believe) swaps are calculated. For example, if a currency pair has a positive swap value, you are earning interest by holding that position each day. If the swap value is negative, you are being charged that much for holding that position. This is based on the difference in interest between the two currencies in the pair, as well as the current price of that pair. Hope this helps a bit.
