An interest rate swap which pays LIBOR square (LIBOR is raised to the second power) or any power of the floating rate, less a fixed amount or rate, in exchange for a floating rate. Examples include the LIBROR-squared swap and the cubed swap.
Power LIBOR swaps often incorporate complex embedded options. Since it is highly leveraged (the gearing is amplified by the power function), the power swap, which is also called a leveraged swap, can be substantially riskier than regular swaps.
