Currency swap is a financial contract between two parties to exchange principal and interest payments denominated in two different currencies. In a currency swap, each party borrows and lends in a different currency. The purpose of a currency swap is to manage currency risk and reduce the cost of borrowing in a foreign currency.
Interest rate swap is a financial contract between two parties to exchange interest payments on a notional amount of principal. In an interest rate swap, one party agrees to pay a fixed rate of interest while the other party agrees to pay a floating rate of interest. The purpose of an interest rate swap is to manage interest rate risk and reduce the cost of borrowing.
