Currency swaps are a private over-the-counter (OTC) contracts which commit two counter parties to exchange, over an agreed period, two streams of interest payments denominated in different currencies At the end of the defined time period, the parties exchange their corresponding principal amounts at the preagreed exchange rate in the contract.

Modifications of Currency Swaps

• Principal-Only Swaps - the principals is exchanged but not the interest.
• Coupon-Only Swaps - the interest is exchanged but not the principal