Trigger Swap

A Trigger Swap is an interest rate swap in which payments are knocked out if the reference rate is above a given trigger rate. FINCAD provides analytics for two types of trigger swaps: periodic and permanent. For a periodic trigger swap, the exchange of payments depends on the reference rate set for that period. If the reference rate for a particular period is greater than the trigger rate, the fixed and floating payments are knocked out. If the reference rate is below the trigger rate in a subsequent period, regular fixed and floating payments are made. For a permanent trigger swap, if the fixed and floating payments are knocked out for a particular period, then all subsequent payments are knocked out as well.