Diff swap - Financial definition
Financial acronyms
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Concise definition of the term diff swap
A diff swap is a floating / floating interest rate swap where the interest rates are those of two different currencies. Payments are however made in only one currency to eliminate foreign exchange exposure.
Comprehensive definition of the term diff swap
Diff swaps are suited to users who wish to take a view on the relative change in the shapes of the yield curves of two different countries.
Where it is felt that the forward curves of the two countries carry an anomalous relationship a diff swap can be entered into to take advantage of this. The single currency nature of the payment eliminates foreign exchange considerations which would otherwise complicate the view.