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Derivatives

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  • January 11, 2022
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CMS Snowball

A snowball whose coupon depends on the previous coupon plus the difference between a strike level and the 10-year constant maturity swap (CMS) rate, rather than LIBOR. The following formula demonstrates how the coupon of a CMS snowball is calculated:

Coupon = [previous coupon + strike% − 10YCMS]

Where 10YCMS denotes the 10-year constant maturity swap rate.


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