A little note from the area of financial economics. When going through the databases of a financial institution, one often encounters terms like foreign exchange swap, currency swap, interest swap. What is this anyway?
I understand that a foreign exchange swap is related to a situation that one has foreign currency now, while it is only needed in a future period. One may opt to sell available foreign exchange now with a right to buy the foreign exchange back in a future period. The advantage is that one gets local currency that is available until the moment a payment is due.
A currency swap involves a situation where the rights and benefits of a loan expressed in foreign currency are exchanged against a foreign party that desires to have local currency. This allows every party to raise money in its local currency and having the benefit to use foreign exchange. I raise Euros on my local market; an American raises dollars on his local markets. We then swap and I get dollars and the American gets Euros. I will pays the dollar interest and I will pay the dollar reimbursement. The American will pay the Euro interest and he will pay the Euro reimbursement.
An interest swap involves swapping interest payment. Assume I pay a variable interest where I would like pay a fixed interest. If I meet someone who pays fixed interest whereas he prefers to pay a variable interest rate, we may decide to swap the obligations.