A swap that is similar to a non-deliverable forward, with the only difference being that settlement for both parties is done through a major currency. Non-deliverable swaps are used when the swap includes a major currency, such as the U.S. dollar, and a restricted currency, such as the Philippine peso or South Korean won. 



|||For example, assume two companies are entered into a swap, exchanging U.S. dollars and South Korean won. The Korean company is due to pay $110,000,000 won, and the U.S. company is due to pay $125,000 U.S. dollars. The fixed rate for the contract is taken as the spot rate for the day before the payment date. In this example, we will assume 929 won/dollar. The Korean company is then due to pay $118,406.89 ($110,000,000/929) U.S. dollars. A net payment is made on the payment date - for this example, the U.S. company pays $6,593.11 ($125,000 - $118,406.89) U.S. dollars to the Korean company.

Non-deliverable swaps have allowed emerging markets with minor currencies to hedge against currency risk.