An asset swap is used to convert cash flow characteristics in order to hedge risks from one financial instrument with undesirable cash flow characteristics to another with favorable cash flow characteristics.
There are two parties involved in an asset swap: the protection seller, who receives cash flows from the bond, and the swap buyer, who hedges the risk associated with the bond by selling it to the protection seller.
The seller pays the asset swap spread, which is equal to the overnight rate plus (or minus) the pre-calculated spread.
Equity derivatives are financial instruments whose value is determined by the change in the price of the underlying asset, if that asset is a stock or stock index.
The forward price is the price at which the seller delivers the underlying asset, derivative or currency to the buyer of a forward contract on a predetermined date.
The International Swaps and Derivatives Association is a professional association that has been working since 1985 to promote and improve the trading of swaps and derivatives.