Yield-Pickup Swap is a type of financial swap that involves exchanging one asset or liability for another in order to take advantage of the yield spread between them. It is a fixed-for-floating interest rate swap in which one party agrees to exchange a fixed interest rate for a floating interest rate on a notional principal amount.

The objective of a Yield-Pickup Swap is to achieve a higher yield on the floating-rate instrument than what is available on the fixed-rate instrument. This can be done by selecting a floating-rate index that pays a higher yield than the fixed-rate instrument being swapped.

For example, suppose a company has a fixed-rate loan that pays 5% interest and wants to take advantage of a higher yield available in the floating-rate market. The company could enter into a Yield-Pickup Swap with a counterparty in which it receives the floating rate of a specified index, such as LIBOR, and pays a fixed rate of 4%. The company would receive the difference between the two rates, or 1%, as a yield pickup.

Yield-Pickup Swaps are often used by financial institutions to enhance their yield on their fixed-income investments. They can also be used by companies to manage their interest rate risk by swapping their fixed-rate debt for floating-rate debt. However, Yield-Pickup Swaps are not without risk, as they are subject to market volatility and credit risk.