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Lookback Swap


An interest rate swap in which the holder pays the highest floating rate setting during the reset window and receives the floating rate set at the beginning of the period plus a specific spread. For instance, in a two-year semi-annual swap (a swap with four resets), one of the parties could receive six-month LIBOR plus 80 basis points and pay the maximum daily level the LIBOR rate has reached in each of the four reset periods.



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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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