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Description: Asset Swap Spread Definition, How to Do an Asset Swap, Asset Swap Definition, Fixed Income Derivative - Assets Swaps (ASW), How swaps work - the basics, Interest rate swap 1 | Finance & Capital Markets | Khan Academy
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In financial accounting, an asset swap is an exchange of tangible assets for intangible assets or vice versa. Since it is a swap of assets, the procedure takes place on the active side of the balance sheet and has no impact on the latter in regard to volume. As an example, a company may sell equity and receive the value in cash, thus increasing liquidity.
A company often utilizes this method when in need for money to invest ( internal financing ) or to pay off debts.
In finance , the term asset swap has a particular meaning. When one refers to an asset swap, one has in mind the exchange of the flow of payments from a given security (the asset) for a different set of cash flows. An example of this is where an institution swaps the cash flows on a U.S. Government Bond for LIBOR minus a spread (say 20 basis points ). Such swaps usually have stub periods in order to bring the chronology of the cash flows into line with that of the underlying bond.
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