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(1) A swap variation with a relatively low floating rate payment if an index rate stays within a preset range over a designated observation interval. If the rate touches or exceeds the limits of the range during the observation interval, the floating rate will rise, often by a leverage factor for the next reset period or for the remaining life of the swap. (2) A corridor swap or its complement, depending on a counterparty's position. One counterparty makes a binary payment if an index rate, typically LIBOR, is outside the designated range at a settlement date.
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