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Callable Coupon Swap


A coupon swap which gives the fixed rate payer the right, without the obligation, to terminate the swap at a specified time before maturity (prior to the end of the swap’s tenor). Opting for exercising callability right will be well justifiable in a declining interest rate environment. The fixed rate payer will be better off if the coupon swap is terminated, as payment of an above-market fixed rate is counterintuitive.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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