An Energy Swap is generally a swap of two different prices on an identical, or similar, Energy underlier
While financial market swaps may involve swapping almost any cash flow for any other cash flow, an Energy Swap involves the swap of two different prices on an identical, or similar energy product or underlier.
The two types of Energy Swap are:
By definition, Energy Swaps are always financially settled
Energy swaps may be traded OTC or on an Exchange
An Energy Swap is very similar to a a financially settled Futures or Forward Contract
Exchange traded swaps are generally settled through non-daily margining - and therefore have credit risk
Financially settled futures, like all futures, are settled through daily margining - and have minimal credit risk
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