In a constant maturity swap, one party pays a fixed rate, or a short-term floating rate such as LIBOR, and the other party pays a floating rate that is the rate on a security known as a constant maturity treasury (CMT) security. The transaction is also sometimes known as a CMT swap. This underlying instrument [...]
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Constant matirity swap
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Tags: bonds, Constant matirity swap, credits, loans, options, Swaps
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We briefly referred to the basis swap, in which both sides pay a floating rate. A typical basis swap involves one party paying LIBOR and the other paying the T-bill rate. As we learned before, the term basis refers to the spread between two prices, usually the spot and futures prices. Here it is simply [...]
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Basis swap
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Tags: banks, LIBOR, money, mortgage, spread, Swap
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