Hedging Fixed Income Securities with Interest Rate Swaps

The interest rate swap market has grown at such a phenomenal pace because swaps can be used in so many different ways by a variety of market participants. Today, swaps are used by issuers to match their funding requirements while still tailoring bonds to match investor demand; they are also used by a variety of participants for asset/liability management. They can be a vehicle for speculating on a financed basis on interest rates and for hedging interest rate risk.