# Interest Rate Swap

*Derivatives & Options — Finicade finance glossary*

An interest rate swap exchanges a fixed rate for a floating one on a notional amount that never changes hands. It's the largest derivatives market in the world, and its everyday use is unglamorous: a company with floating-rate debt swaps into fixed to make its interest bill predictable. Only the net difference is paid each period, so the credit exposure is a small fraction of the notional — which is why headline notional figures overstate systemic risk.

**Also known as:** IRS, rate swap, fixed for floating swap

**Related terms:** [Swap](https://finicade.com/glossary/swap), [SOFR](https://finicade.com/glossary/sofr), [Overnight Index Swap (OIS)](https://finicade.com/glossary/overnight-index-swap), [Notional](https://finicade.com/glossary/notional), [Duration](https://finicade.com/glossary/duration)

**Taught in:** Hull Street — Swaps

Source: https://finicade.com/glossary/interest-rate-swap