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A swap agreement usually embedded in a structured note or similar instrument, in which the swap payments are expressed relative to a multiple of a notional amount, usually the face or principal amount of the underlying structured note or a multiple of a rate spread. Leveraged swaps are used primarily to minimize the cost of 'hiring' the issuer of the structured note which serves as the carrier vehicle for the swap structure. The issuer receives a cost of funding reduction and embedding the swap in leveraged form concentrates this funding cost reduction on a smaller base, reducing the total cost of creating the instrument. See also Leveraged Derivatives Transaction (LDT).
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