Liquidity swap
From ACT Wiki
Liquidity swaps typically refer to transactions which effect a liquidity transformation between:
- an insurer (which has plenty of liquidity) and
- a bank (which is temporarily short of liquidity).
This is usually done by exchanging high-credit quality, liquid assets such as gilts held by the insurer, with illiquid or less liquid assets, such as asset-backed securities (ABS) held by the bank.
