A currency swap entails the exchange of two series of payments and two notional principal amounts each denominated in a different currency. For instance, the two counterparties may enter into a swap whereby one pays a rate on a notional amount denominated in dollar, whilst receiving a rate on a notional denominated in sterling. This form of swap is relatively liquid and can be assigned, terminated or overlaid with another swap. A currency swap can be closed out by settling the net present value of remaining payments between the counterparties. The counterparty with a profit will receive that value from the counterparty with a loss. Existing swaps can also be combined or blended (and hence called blended swaps) with new swaps, or extended (extendible swaps), where the cost of closing out the swap is accounted for in the new agreement.

A currency swap can be closed out by entering into an offsetting swap, with the resulting gains or losses depending on forward prices at the time of closing out the swap.