Before I explain what interest rate swaps are, let`s understand what swaps are and why they are traded? Consider an interest rate swap with the following characteristics: FRAP-(R-FRA) ×NP×PY) × (11-R×(PY)) where:FRAP-FRA paymentFRA-Forward rate rate rate rate rate, or the fixed interest rate paidR-reference, or variable interest rate used in the nominal capital contract, or amount of the loan that applies interest on period, or number of days during the duration of the X-number of days per year contract on the basis of the correct daily counting agreement for the R contract – `text`FRA`) `times NP`mal P`Y` fixed interests, which are paid, `R` or `floating rate` used in the contract, `use of the contract ` NP` ` `text` and `nominal principle`. , or the amount of the loan to which the interest on which `text` is applied applies. i.e. the number of days during the term of the contract, and “text” (“number of days per year” on the basis of the appropriate “text-day counting agreement” for the contract; “End-Aligned”FRAP(Y (R-FRA) ×NP×P) × (1-R× (YP)wo:FRAP-FR-PaymentFRA-Forward Rate Agreement or fixed interest rate paidR reference-Reference-Reference , Reference or variable rate used in the notional NFP contract, or amount of the loan that applies interest over the period P-period , or number of days in the duration of the contractY-number of days per year on the basis of the correct daily counting agreement for the contract The FRA determines the rates used with the termination date and the fictitious value. FSOs are billed on the basis of the net difference between the contract interest rate and the market variable rate, the so-called reference rate, liquid severance pay. The nominal amount is not exchanged, but a cash amount based on price differences and the face value of the contract. Interest rate swaps (IRS) are often considered a number of NAPs, but this view is technically incorrect due to the diversity of methods for calculating cash payments, resulting in very small price differentials.