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Amortizing Swap
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An interest rate swap with a declining notional principal amount reflecting the principal amortization of an underlying fixed or floating rate instrument. If the actual amortization schedules of the swap and the underlying are not set at identical levels in advance (as in a mortgage obligation), the fixed rate receiver faces significant prepayment or extension risk. See Index Amortizing Swap, Indexed Principal Swap (IPS), Interest Rate Swap, Tailored Swap.
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