An interest rate swap in which one party is under obligation to make periodic payments to another party based on a variable interest rate applied to the swap’s effective notional amount. This swap is effectively at-the-money, and the fixed leg of which has been fully prepaid, to the effect that the party that receives the variable-leg-based payments has no obligation to make any future payments under the contract. As such, the fair value of the fixed leg and the fair value of the variable leg are equal and offsetting because the ATM interest rate swap has a fair value of zero.

This swap involves an initial net investment that is equal to the amount determined by applying the effective notional amount to the underlying, with no adjustment of the underlying.