The variable part of an interest rate swap is usually reset against a published index. The floating part of a constant-duration swap periodically attaches against a point on the swap curve. A Constant Maturity swap is an interest rate swap in which the interest rate is regularly reset on one leg, but by reference to a market exchange rate and not LIBOR. The other stage of the swap is usually LIBOR, but can be a fixed interest rate or possibly another constant maturity rate. Constant duration swaps can be single or cross-over swaps. Therefore, the main constant maturity swap factor is the shape of the implicit yield curves. A constant maturity swap in a currency against LIBOR is similar to a series of differential interest rate corrections (or "DIRF") in the same way as an interest rate swap similar to a series of interest rate agreements in advance. The valuation of constant maturity swaps depends on the volatility of different forward interest rates and therefore requires a stochastic interest curve model or a close methodology, such as convexity adjustment, see for example Brigo and Mercurio (2006). There is a risk for the borrower if he had to liquidate the FRA and the interest rate on the market was unfavourable, which would result in a loss of the borrower on the cash compensation.

FRA are very liquid and can be traded in the market, but there will be a cash difference between the FRA rate and the prevailing price in the market. Interest rate swaps (IRSs) are often considered a series of FR A, but this view is technically wrong due to differences in calculation methods for cash payments, resulting in very small price differentials. . . .