Constant maturity swap
From Wikipedia, the free encyclopedia
A constant maturity swap, also known as a CMS, is a swap that allows the purchaser to fix the duration of received flows on a swap.
The floating leg of an interest rate swap typically resets against a published index. The floating leg of a constant maturity swap fixes against a point on the swap curve on a periodic basis.
An interest rate swap where the interest rate on one leg is reset periodically but with reference to a market swap rate rather than LIBOR. The other leg of the swap is generally LIBOR but may be a fixed rate or potentially another constant maturity rate. Constant maturity swaps can either be single currency or cross currency swaps. The prime factor therefore for a constant maturity swap is the shape of the forward implied yield curves. A single currency constant maturity swap versus LIBOR is similar to a series of differential interest rate fix (or "DIRF") in the same way that an interest rate swap is similar to a series of forward rate agreements.
[edit] Example
A customer believes that the difference between the six-month LIBOR rate will fall relative to the three-year swap rate for a given currency. To take advantage of this, he buys a constant maturity swap paying the six-month LIBOR rate and receiving the three-year swap rate.de:Constant Maturity Swap ja:コンスタント・マチュリティ・スワップ
Derivatives market | |
|---|---|
| Derivative (finance) | |
| Options | Terms:
Strike price ·
Expiration ·
Open interest ·
Pin risk
Vanilla options:
Option styles ·
Call ·
Put ·
Warrants ·
Fixed income ·
Employee stock option ·
FX
Exotic options:
Asian ·
Lookback ·
Barrier ·
Binary ·
Swaption ·
Mountain range
Options strategies:
Covered call ·
Naked put ·
Collar ·
Straddle ·
Strangle ·
Butterfly
Options spreads:
Bull spread ·
Bear spread ·
Calendar spread ·
Vertical spread ·
Debit spread ·
Credit spread
Valuation of options: Moneyness · Option time value · Put-call parity · Black-Scholes · Black · Binomial · Simulation |
| Swaps | Interest rate swap · Total return swap · Equity swap · Credit default swap · Forex swap · Currency swap · Constant maturity swap · Basis swap · Volatility swap · Variance swap |
| Other derivatives | |
