Java Quant

            Financial Quantitative Algorithms


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 Rates 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. The most common traded instruments are: Cap, Floor Spread, Range Acrual, Target Redemption notes on CMS and CMS Spread © 2006 H. Aliaga. Design by Cesar.
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