Airbag Swap
An interest rate swap whose notional value adjusts according to rising interest rates by indexing the floating portion to a constant maturity swap (CMS). Investopedia Says:
These swaps were created to hedge investments in areas where interest rate fluctuations have significant effects. Due to an increasing notional value, an asymmetrical payout schedule occurs whereby the swap's net payment with higher interest rates is greater than that occurring with lower interest rates. Related Terms:
Constant Maturity Swap
Interest Rate
Notional Principal Amount
Notional Value
Swap |