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Power swap
       
 
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Power swap

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Power swap
A Swap whose floating leg is based on the square (or some higher exponent) of the reference Interest rate. Although dismissed by some as little more than a speculative tool for taking highly leveraged positions on the direction of Interest rates, power swaps have been shown (by Robert Jarrow and Donald van Deventer) to have their uses in Hedging commercial banks’ deposits and credit card loan portfolios.

See also power Option
Posted by  Privatebanking.com
 
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