While the fixed-rate stream does not change for the duration of the swap, the floating rate stream changes periodically. The floating rate will adjust as its benchmark interest rate, changes in accordance with market conditions. The benchmark is often LIBOR, but may also be the yield on one-year U.S. Treasuries or another interest rate. Two parties, called counterparties, enter into fixed-for-floating swap transactions to reduce their exposure to changes in interest rates or to attempt to profit from changes in interest rates.
Investment dictionary. Academic. 2012.
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