An equity swap is a financial derivative contract where two parties agree to exchange future cash flows based on the performance of underlying equity instruments, such as stocks or stock indices. Equity swaps can involve various arrangements, including swapping fixed interest payments for floating interest payments, exchanging cash flows based on different stock returns, or transferring ownership rights between parties. Equity swaps allow investors to hedge against or speculate on equity price movements, adjust portfolio exposure, or manage risk without owning the underlying assets. They are commonly used by institutional investors, hedge funds, and financial institutions for asset allocation, diversification, and trading strategies.

Equity financing is a method of raising capital for a business by selling ownership stakes, such as stocks or equity securities, to investors in exchange for funds. Unlike debt financing, which involves borrowing money that must be repaid with interest, equity financing does not create debt obligations for the company. Instead, investors become shareholders and have an ownership interest in the business, entitling them to a share of profits and voting rights in corporate decisions. Equity financing can take various forms, including initial public offerings (IPOs), private placements, venture capital investments, and crowdfunding campaigns. It offers businesses flexibility in accessing capital without incurring fixed repayment obligations and may be suitable for startups, growth-oriented companies, or those with limited access to traditional financing sources.

The equity capital market (ECM) is a segment of the financial market where companies raise capital by issuing equity securities, such as stocks or shares, to investors in exchange for ownership stakes in the company. The ECM facilitates the initial public offerings (IPOs), secondary offerings, private placements, and other equity financing transactions. It provides businesses with access to capital for growth, expansion, acquisitions, or strategic initiatives, while offering investors opportunities for capital appreciation and dividends. The ECM plays a crucial role in capital formation, corporate governance, and investor protection, contributing to economic development and market efficiency. Equity capital markets operate through stock exchanges, investment banks, brokerage firms, and other financial intermediaries that facilitate the issuance, trading, and valuation of equity securities.