Constant Maturity Swap - CMS

AAA

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.

RELATED TERMS
  1. Hara-Kiri Swap

    An interest rate or cross-currency swap devoid of any profit ...
  2. Airbag Swap

    An interest rate swap whose notional value adjusts according ...
  3. Commodity Swap

    A swap in which exchanged cash flows are dependent on the price ...
  4. Asset Swap

    Similar in structure to a plain vanilla swap, the key difference ...
  5. Fixed Interest Rate

    An interest rate on a liability, such as a loan or mortgage, ...
  6. Interest Rate Swap

    An agreement between two parties (known as counterparties) where ...
Related Articles
  1. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  2. Active Trading

    How Companies Use Derivatives To Hedge Risk

    Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
  3. Forex Education

    Using Currency Correlations To Your Advantage

    Knowing the relationships between pairs can help control risk exposure and maximize profits.
  4. Options & Futures

    Hedge Funds Hunt For Upside, Regardless Of The Market

    Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen.
  5. Investing

    How can I use an "airbag swap"?

    An airbag swap is an interest rate swap designed to provide a cushion against rising interest rates. The airbag swap originally was designed for insurance companies because their balance sheets ...
  6. Options & Futures

    What are the differences between divergence and convergence?

    Find out what technical analysts mean when they talk about a market experiencing divergence or convergence and how they affect trading strategies.
  7. When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps.
    Investing Basics

    How Are Interest Rate Swaps Valued?

    When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps.
  8. Options & Futures

    Futures Quotes Explained The "Easy" Way

    If there’s a security whose price fluctuates, there can theoretically be a futures marketplace for it.
  9. Simple interest is a quick method of calculating the interest charged on a loan.
    Investing

    Simple Interest

    Simple interest is a quick method of calculating the interest charged on a loan. Simple interest is determined by multiplying the interest rate by the principal by the number of periods.
  10. Options & Futures

    Why is the Accumulative Swing Index helpful for traders and/or investors?

    Find out why J. Welles Wilder believed that the accumulative swing index could be used in the futures markets to indicate long-term trends.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center