A swap that is constructed using add-ons or additional features (e.g., optionality) in order to alter its risk-return profile for risk management purposes or enhancement of its value. A structured swap may be an interest rate swap or a cross-currency swap that is embedded with a derivative or more. For example, such a swap may allow a market participant to minimize its market exposure.
Another example is a swap is structured so as the two parties can exchange LIBOR capped and floored for the fixed rate (swap rate).
A typical form of structured swap is a swaption, which is by composition a swap embedded with an option to exercise (i.e., it grants its owner the right but not the obligation to enter into an underlying swap).
