  We study financial networks where banks are connected by debt contracts. We
consider the operation of debt swapping when two creditor banks decide to
exchange an incoming payment obligation, thus leading to a locally different
network structure. We say that a swap is positive if it is beneficial for both
of the banks involved; we can interpret this notion either with respect to the
amount of assets received by the banks, or their exposure to different shocks
that might hit the system.
  We analyze various properties of these swapping operations in financial
networks. We first show that there can be no positive swap for any pair of
banks in a static financial system, or when a shock hits each bank in the
network proportionally. We then study worst-case shock models, when a shock of
given size is distributed in the worst possible way for a specific bank. If the
goal of banks is to minimize their losses in such a worst-case setting, then a
positive swap can indeed exist. We analyze the effects of such a positive swap
on other banks of the system, the computational complexity of finding a swap,
and special cases where a swap can be found efficiently. Finally, we also
present some results for more complex swapping operations when the banks swap
multiple contracts, or when more than two banks participate in the swap.
