Is the transaction in which different foreign exchange and currencies are bought, sold, and exchanged at the exchange rates fixed today for a future date. In general, firms engaged in foreign trade use to eliminate the risk of rate of exchange.
For instance, firms engaged in imports carry out forward transactions to buy foreign exchange. In this way, they have taken measures against the fluctuations in the rate of exchange for foreign exchange payments they would make at a future date.
A swap, which is used to mean the exchange of assets, is a product used in general for protection against the changes in interest and rates of exchange.
In FX swaps, principals are exchanged while in interest swaps only interest payments change hands.