A participating swap which allows the floating rate payer to place a cap on maximum payment and retain some participation in any fall in a commodity price. For example, a power generating company may consider entering a commodity (oil) participating swap under which it pays an off-market fixed rate of $ 2 over the commodity swap rate in exchange for partial participation (e.g., 60%) in any fall in oil price over the reference period.

At the end of the reference period, if the average oil price is above the preset fixed rate, then the company pays the average price and is reimbursed the additional amount above that price by virtue of the swap. If, instead, the average price of oil is lower than the agreed off-market swap rate, then the company pays only 60% of the price decline below the cap rate, rather than paying the full amount of that decline.