Broadly speaking, a swap that is linked to the performance of treasury securities (T-bills, t-notes). Actually, however, the treasury-linked swap is sort of a cash-settled put option (originally written by Gibson Greetings to Bankers Trust) which was initially based on the spread between the price of 7.625 percent 30-year U.S treasury security maturating on November 15, 2022, and the arithmetic average of the bid and offered yields of the most recently auctioned obligation of a two-year treasury note. In essence, this represents an option on a group or index of government securities. Gibson were to pay Bankers Trust LIBOR and Bankers Trust were to pay Gibson LIBOR plus 2%.

Furthermore, the amount of the principal payment at maturity was agreed upon such that Gibson were to pay $30 million while Bankers Trust were to pay the minimum of $30.6 million or ($30 million x [1+ (103 x Y₂/4.88)- (P₃₀ /100) ], where Y₂ is the 2-year treasury yield and P₃₀ is the 30-year treasury price. Both parties to the treasury-linked swap entered in June 1993 into a knock-out call option, in order to mitigate exposure to small principal repayment risk. Gibson were to receive at expiration date (against a premium paid up-front to Bankers Trust) an amount defined in the following formula:

12.5x $25 million x max (0, 6.876%- Y₃₀).