The swap rate is a fixed interest rate that is used to calculate the fixed payments in a derivative instrument called an interest rate swap. An interest rate swap is a financial contract between two parties who agree to exchange interest rate cash flows based on a notional amount.

For an interest rate swap, two types of interest rates are required: a fixed interest rate and a floating interest rate. The fixed rate is the predetermined rate that one party agrees to pay, while the floating rate is based on a reference rate such as a government bond yield.