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Derivatives

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  • October 5, 2020
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Compounding Swap

A swap in which interest, instead of being paid, compounds forward until maturity. The interest is compounded forward until the swap reaches its maturity date. In this sense, the accrued interest will be paid out at the end of the swap term.

For example, a compounding swap may involve compounding floating rate cash flows forward at LIBOR plus a given spread.


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