• An equity swap is similar to an interest rate swap, but instead of one side being “fixed”, it is based on the performance of a stock index.

  • These swaps are easy to set up and trade on the OTC market. Most stock exchanges are between large financial firms such as auto finance companies, investment banks and lending institutions.
  • The interest rate part often refers to LIBOR, while the equity part often refers to a major stock index such as the S&P 500.