Swap

Swap means:
a notional principal contract that generally requires one party to make periodic payments of a fixed amount and the other party to make periodic payments on a variable specified index. Derivative financial instrument in which two parties agree to exchange payments calculated by reference to a notional principal amount. In the classic interest rate swap agreement two parties contract to exchange interest payments based on the same amount of indebtedness of the same maturity and with the same payment dates; one party provides fixed interest rate payments in return for variable rate payments from the other party and vice versa.The tax treatment of such derivative products as interest rate swaps is unclear. Proposed regulations require the amortization on a net basis of payment obligations on a swap. Former U.S. Treasury Department Proposed Regulation (check if this Prop. Reg. is current here) 1.446-3(e)(l).