Step-up swap

Step-up swap

An interest rate swap on which the notional principal increases according to a predetermined schedule.

Step-Up Swap

An interest rate swap with scheduled increases in the notional value. That is, the counterparties to the swap may agree to exchange different interest rates with a notional value of $1 million, with an increase to $1.1 million the following month, and $1.2 the month after that. Step-up swaps increases the dollar amounts of the swap, but the interest rate remains the same for the fixed rate payer and changes only according to the benchmark rate for the floating rate payer.