Constant Maturity Swap - CMS

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DEFINITION of 'Constant Maturity Swap - CMS'

A variation of the regular interest rate swap. In a constant maturity swap, the floating interest portion is reset periodically according to a fixed maturity market rate of a product with a duration extending beyond that of the swap's reset period.

INVESTOPEDIA EXPLAINS 'Constant Maturity Swap - CMS'

Constant maturity swaps are exposed to changes in long-term interest rate movements. They are initially priced to reflect fixed-rate products with maturities between two and five years in duration, but adjust with each reset period.

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