DEFINITION of 'Index Amortizing Swap  IAS'
An interest rate swap where the notional principal amount declines or is amortized when interest rates decline. An index amortizing swap (IAS) is basically an overthecounter contract between two parties on an amortizing notional principal swap that may decrease over the life of the swap. The notional principal amortizes or declines more rapidly when shortterm interest rates  indexed to LIBOR or another widelyused rate index  decline, and amortizes more slowly when shortterm rates rise.
Also known as an index amortizing rate (IAR) swap or an index principal swap.
BREAKING DOWN 'Index Amortizing Swap  IAS'
In a typical index amortizing swap, a bank or insurance company receives interest payments based on a fixed rate while paying its counterparty a floating rate of interest indexed to shortterm LIBOR.
The term "amortizing" in an index amortizing swap is not meant to imply payment of principal, but rather, refers to the declining notional principal amount that forms the basis for interest payments.
Index amortizing swaps are particularly useful to hedge against prepayment risk in mortgagebacked securities.

Amortizing Swap
An exchange of cash flows, one of which pays a fixed rate of ... 
Swap
A derivative contract through which two parties exchange financial ... 
Accreting Principal Swap
A derivative where counterparties exchange financial instrument ... 
Airbag Swap
An interest rate swap whose notional value adjusts according ... 
Foreign Currency Swap
An agreement to make a currency exchange between two foreign ... 
Notional Principal Amount
In an interest rate swap, the predetermined dollar amounts on ...

Managing Wealth
An InDepth Look At The Swap Market
The swap market plays an important role in the global financial marketplace; find out what you need to know about it. 
Trading
An Introduction To Swaps
Learn how these derivatives work and how companies can benefit from them. 
Trading
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. 
Trading
Currency Swap Basics
Find out what makes currency swaps unique and slightly more complicated than other types of swaps. 
Investing
What's an Interest Rate Swap?
An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount. 
Investing
How To Read Interest Rate Swap Quotes
Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes 
Trading
Interest Rate Swaps Explained
Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows. 
Investing
Explaining Amortization In The Balance Sheet
Amortization occurs when an assetâ€™s value decreases over time, usually over its estimated useful life. 
Trading
Different Types of Swaps
Investopedia explores the most common types of swap contracts. 
Investing
Explaining Amortization In The Balance Sheet
Amortization is important to account for intangible assets. Read to find out more about amortization.

What does the notional principal of a derivative contract refer to?
Find out more about the notional principal amount, interest rate swap agreements and how the notional principal amount in ... Read Answer >> 
How do companies benefit from interest rate and currency swaps?
An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Answer >> 
What would motivate an entity to enter into a swap agreement?
Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... Read Answer >> 
Can individual investors profit from interest rate swaps?
Find out how individual investors can speculate on interest rate movements through interest rate swaps by trading fixed rate ... Read Answer >> 
What are interest rate swaps on the OTC market?
Learn about interest rate swaps and how they are traded over the counter, and understand the impact of DoddFrank on swaps ... Read Answer >> 
What is an absolute rate?
An absolute rate is easy to understand once you know the basics of an interest rate swap. An absolute rate is the fixed rate ... Read Answer >>