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.
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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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Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
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Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen.
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Knowing the relationships between pairs can help control risk exposure and maximize profits.
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