Zero Basis Risk (Zebra) Swap

A swap between a municipality which pays a fixed rate and a financial intermediary which pays a floating rate exactly equal to the floating rate requirement on the municipality's floating rate debt. Receiving the exact floating rate called for under the terms of the municipal debt issue prevents problems with federal regulations that prohibit arbitrage transactions on municipal debt. Also called Perfect Swap, Actual Rate Swap. See also Arbitrage Bond.

Glossary * Z