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Basis Swap A basis swap is a floating-floating interest rate swap. A simple example is a swap of 1-month USD Libor for 6-month USD Libor. This might be used to customize exposures to specific points on the yield curve. More common are basis swaps between two floating indexes from different segments of the money market. A bank that lends at prime but finances itself at Libor would be a natural user of a prime-Libor basis swap. The bank would be using the swap to eliminate basis risk. It is this general application from which basis swaps derive their name. 
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