equity swap

An equity swap is a financial agreement where two parties exchange future cash flows based on the performance of an underlying stock or stock index. Typically, one party agrees to pay the return of a stock (including dividends and appreciation), while the other pays a fixed or floating interest rate. This allows investors to gain exposure to stock performance or hedge risks without directly buying or selling stocks, often for reasons like managing taxes, customizing risk profiles, or avoiding market constraints. Essentially, it's a tailored contract enabling both sides to benefit from or hedge against movements in stock prices.