A Bermudan swaption in which the option (on the underlying swap) can be exercised on every reset date from present time up to the swaption‘s expiration date, inclusive. If exercised, the option enters the holder into a swap that starts at the exercise date and matures at a later date. This swaption is equivalent to a Bermudan option on a constant maturity (CM) coupon bond whose par value is used as the strike price.

The early exercise premium is positively correlated with time to maturity and negatively correlated with the strike price (strike rate).