Swaps: A Market That Needs More Sunlight

In the financial world, a swap is essentially an exchange of payment obligation between two parties, say floating-rate interest for fixed-rate interest. During the 1980s, this exotic financing instrument and related "derivatives" came into their own as a way for Corporate America to manage its financial risk. In a remarkably short period, value of swaps outstanding has grown to $5 trillion--one of the true financial-market success stories.

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