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Subject 8. Forward swaps

Definition: a forward contract to enter into a swap.

A forward swap commits the parties to entering into a swap at a later date at a rate agreed on today. Unlike a swaption, which is the right to enter into a swap, it is a binding commitment to enter into a swap.

A forward swap requires no cash payment up front. Options give one party the choice of entering into a swap but require payment of a premium up front.

Study notes from a previous year's CFA exam:

8. Forward swaps