Editing Interest rate swap (section)

===Uses===
Interest rate swaps are used to hedge against or speculate on changes in interest rates. They are also used to manage cashflows by converting floating to fixed interest payments, or vice versa.

Interest rate swaps are also used speculatively by hedge funds or other investors who expect a change in interest rates or the relationships between them. Traditionally, fixed income investors who expected rates to fall would purchase cash bonds, whose value increased as rates fell. Today, investors with a similar view could enter a floating-for-fixed interest rate swap; as rates fall, investors would pay a lower floating rate in exchange for the same fixed rate.

Interest rate swaps are also popular for the [[arbitrage]] opportunities they provide. Varying levels of [[creditworthiness]] means that there is often a positive [[quality spread differential]] that allows both parties to benefit from an interest rate swap.

The interest rate swap market in USD is closely linked to the [[Eurodollar]] futures market which trades among others at the [[Chicago Mercantile Exchange]].