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.