An interest rate swap that is designed so that payment obligations occur only when the reference rate is within some specified range or “corridor”. The corridor swap is sort of a speculation on the volatility of the floating rate (usually LIBOR). For example, a firm could enter into a swap to receive a fixed rate and pay a floating rate (say a 6-month LIBOR) only when LIBOR is in the range of 3%-6%, i.e., in case it is greater than 3% but lower than 6%.

Corridor swaps are also used in Forex markets. In this sense, a corridor swap (or bonus swap) involves the payment of a best case interest rate below par if an exchange rate sticks to a preset corridor, and a worst-case above par if the exchange rate slips out that corridor.