It stands for cross-currency basis swap; a floating-for-floating swap that involves exchanging two streams of interest payments each denominated in a different currency. In other words, it entails the exchange of a floating rate in one currency for a floating rate in another currency. This swap is a combination of an interest rate swap and a cross currency swap. Unlike standard basis swaps, this swap does also involve an exchange of notional principal amounts (NPAs).

The floating reference for each leg is linked to a specific reference rate (e.g., a three-month deposit rate, in a respective currency). In a standard swap, one party would pay (receive) 3-month USD LIBOR (or any applicable reference rate) and receive (pay) the relevant 3-month deposit rate in the other currency plus a given spread.

The basis spread partly captures the difference in credit risks inherent in the two reference rates.