Asset-Based Swap
Usually, an interest rate swap agreement in which the fixed rate payer holds a bond whose coupon rate is reflected in the swap terms. The expression may also describe any swap initiated by the holder of an asset which generates the payment stream on one side of the swap. If the fixed rate reflects the coupon on a specific bond, there may be a one-time principal payment at the beginning of the swap to reflect the fact that the coupon on the designated asset is different from the swap rate for the term of the swap. Depending on the swap terms, the credit risk of the underlying asset can be the responsibility of either party. See Asset Swap.
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