**Amortizing swap, **

### Definition of Amortizing swap:

An amortizing swap is an interest rate swap where the notional principal amount is reduced at the underlying fixed and floating rates. Also called an amortizing interest rate swap, it is a derivative instrument in which one party pays a fixed rate of interest while the other party pays a floating rate of interest on a notional principal amount that decreases over time. The notional principal is tied to an underlying financial instrument with a declining (amortizing) principal balance, such as a mortgage. An amortizing swap is an exchange of cash flows only, not principal amounts.

As with plain vanilla swaps, an amortizing swap is an agreement between two counterparties. The counterparties agree to exchange one stream of future interest payments for another, based on a specified principal amount. Amortizing swaps are used to reduce or increase exposure to fluctuations in interest rates. They can also help obtain a marginally lower interest rate than would have been possible without the swap. The main difference with amortizing swaps is the principal amount of the swap declines over time, typically on a fixed schedule. For example, an amortizing swap could be tied to a real estate mortgage which is being paid down over time.

Swap for which the amount of notional principal decreases during its life.

### How to use Amortizing swap in a sentence?

- An amortizing swap is an exchange of cash flows only, not principal amounts.
- An amortizing swap is an interest rate swap where the notional principal amount is reduced at the underlying fixed and floating rates.
- An amortizing swap is a derivative instrument in which one party pays a fixed rate of interest while the other pays a floating rate of interest on a notional principal amount.
- Amortizing swaps trade over-the-counter.

Meaning of Amortizing swap & Amortizing swap Definition