A compounding swap that can be terminated on preset payment dates. Once terminated, the swap requires the floating-rate payer to pay the compounded value of the floating amounts up to the date of termination, whilst the fixed-rate payer is required to pay the compounded value of the fixed payments up to the date of termination. Canceling the swap will effectively have the effect of setting the fixed leg to par.

The cancelable compounding swap is a combination of a compounding swap with a cancelable option.