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Derivatives




Min-Max Swap


An interest rate swap that entails the exchange of a fixed rate for floating rate, where the floating leg is bounded between an upper and a lower level within which it can fluctuate. This implies that an embedded collar is placed on the floating rate payment. The purchase of the cap is financed by the sale of the floor, taking the transaction cost of establishing the upper and lower limits into zero.

This swap is sometimes called a banded swap or a collared swap.



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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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