An index amortizing note swap is a swap contract with a variable
notional amount. The notional amount decreases according to an index value.
The amount reduced can be a percentage of the initial amount or a percentage of the
previous period's amount (seen an example below). The relationship between the index
and the percentage is specified by the user in the dialog window. If the index value
is between two specified values, the percentage is equal to the linearly interpolated
value. If the index value is outside the range of specified values, the value is the
nearest node value.
Below is a sample dialog window for index amortizing swaps and notes. The interest
rate to pay is the Index (LIBOR, in this case) of the Term
(6 Months) multiplied by the Leverage plus the Spread,
subject to the Upper Bound and the Lower Bound.
In an index amortizing note, the contract holder will receive the
principal. Otherwise, the contract holder receives only the interest payments.