Liquidity swap

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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.


See also