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I am dealing with a cross currency swap where the notional amount changes halfway through the strip accrual period, and I would like to know if there's a specific name for this structure? A stylized example below:

Consider a vanilla AUDUSD CCIRS with a 5% fixed rate on the USD side with a 10m USD notional. Let's say the accrual period is 6m, such that we would expect the undiscounted cashflow for the USD leg to be roughly 5% * 6/12 * 10m = 250k.

The structure im asking about has a notional that would change to say 9million 3 months through the accrual period, such that the end undiscounted cashflow for the USD leg would be approximately 5% * 3/12 * 10m + 5% * 3m * 9m = 237.5k

I would think any naming convention would differ from a vanilla amortized swap given the quirk of the notional amounts changing halfway through the accrual period.

Thank you in advance

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I have never seen this sort of configuration becuase it is not well defined.

If the payment for a specific period is defined as $$ N \times R \times dcf $$ Then there is no scope to allow a notional that changes during that period. Allowing a notional to change would theoretically allow it to change to any values at any time and thus would be poorly defined and difficult to code.

However, on the other hand, and what I have seen before, usually aligning with an unconventional term loan covenant is to define a schedule where the payment dates are shifted.

Consider two periods:

  • 1st Jan to 1st Apr in 10mm notional at 5%
  • 1st Apr to 1st Jul in 9mm notional at 5%

Traditionally this first period would pay on 1st Apr, but you can manually speciify the payment date as:

  • 1st Jan to 1st Apr in 10mm notional at 5% payment on 1st Jul
  • 1st Apr to 1st Jul in 9mm notional at 5% payment on 1st Jul

This is a well defined structure and is what your swap intends, IMO.

Albeit these are a bit of a nuisance to price and everyone always ignores the convexity adjustments for shifted payment dates because in a time pressurised environment it is hoped they are negligible enough to ignore, especially for rare and small trades where the margin is usually grossed up anyway for being an unconevntional swap.

The name I have used for such swaps is Customised Amortising Swap

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I'm not sure if intra-period amortizations (as described in the question) are economically meaningful because they're equivalent to an adjusted "vanilla" amortization profile i.e. the period amort profile can always be re-weighted to a flat amount for the whole period - I think this is what Attack68 is alluding to in the first part of their reply. For instance, in your example it's a 9.5mm notional for a 5% semiannual coupon. There may be esoteric reasons to recast the amort profiles as you have in your case (legal, structural) but that hardly justifies them as a different product.

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