A swap that mainly hedges roll risk where the roll-lock payer pays the average cost of the roll measured at a series of preset points in time before maturity. The roll captures the difference between the near-month and next-month futures prices. In consideration, the roll-lock receiver pays a floating rate (such as a LIBOR-based rate) set a prespecified date after the expiration of the near-month contract.
This swap is also called a roll-lock swap.
