What type of swap is referred to as a fixed-for-floating swap?

A fixed-for-floating swap is a straightforward agreement between two parties where one party pays a fixed interest rate and receives a floating interest rate in return, or vice versa. This arrangement is designed to help the parties manage their interest rate risk. The fixed-rate payer benefits from predictable payments, while the floating-rate payer can take advantage of potential decreases in interest rates over time.

The plain vanilla swap is the most common and basic form of interest rate swap, characterizing the fixed-for-floating nature of the exchange. It serves as a foundational tool in debt and money markets for institutions looking to hedge or speculate on interest rate movements.

The callable swap, on the other hand, includes an option for the payer of fixed rates to terminate the swap early under certain conditions, adding complexity. A forward swap involves a similar but future arrangement rather than an immediate exchange, while equity swaps pertain to the exchange of cash flows based on equity returns as opposed to interest rates.

Thus, the choice of plain vanilla swap accurately captures the essence of a fixed-for-floating arrangement, emphasizing its fundamental nature within the broader context of interest rate derivatives.