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Constant Maturity Swaps and CMS-Linked Notes At A Glance
Capabilities and Services
A constant maturity swap (CMS) is a type of interest rate swap. In a "plain vanilla" interest rate swap one party periodically pays cash flows equal to a pre-determined fixed rate on a notional principal to a counterparty for the duration of the contract. In exchange, the counterparty periodically pays cash flows equal to a variable ("floating") rate on the same notional amount and for the same duration of the contract. The floating rate depends on a reference index or rate such as 3 month LIBOR. At swap initiation, the fixed rate is typically chosen in such a way as to make the present value of cash flows equal between the two parties to the transaction. Such a fixed rate is referred to as a par swap rate or just a "swap rate." An example of a plain vanilla interest rate swap is a 30-year contract in which one party pays a fixed rate of 3% annually in semi-annual installments, and in exchange receives a LIBOR rate paid each quarter.
NERA assists clients in disputes relating to a wide range of interest rate products and structured products including CMS and CMS-linked notes. NERA's Securities experts have been involved in numerous disputes where we have analyzed issues related to suitability, risk, and valuation of such products. Our experts have extensive experience valuing and analyzing complex interest rate products, structured products, and other derivatives.