swaps illustration diagrams — how to read

This write-up covers IRS, x-ccy swap…

These block diagrams are popular and partially useful, but beginners often don't realize:

* initial context — typically a corporation has a periodic liability, or an investor has a periodic income.

** We had better ignore all the other arrows first.

* the motivation — typically to convert the initial single arrow to other arrows. The swap contract adds 2 arrows, one of them cancelling out the pre-existing arrow.

** we had better focus on the 3 arrows and ignore other parts of the diagram.

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