for the next five years, or for the five-year government bond rate. In the U.S. market, the second type of constant maturity swap is known as a constant maturity Treasury swap.   Accreting and Amortizing Swaps In a plain vanilla swap, the notional principal remains unchanged during the life of the swap. However it is possible to trade a swap where the notional principal varies during its life. An accreting (or step-up) swap is one in which the principal starts off at one level and then increases in amount over time. The opposite, an amortizing swap, is one in which the notional reduces in size over time. An accreting swap would be useful where for instance, a funding liability that is being hedged increases over time. The amortizing swap might be employed by a borrower hedging a bond issue that featured sinking fund payments, where a part of the notional amount outstanding is paid off at set points during the life of the bond. If the principal fluctuates in amount, for example increasing in one year and then reducing in another, the swap is known as a roller-coaster swap. Another application of an amortizing swap is as a hedge for a loan that is itself an amortizing one. Frequently this is combined with a for- ward-starting swap, to tie in with the cash flows payable on the loan. The pricing and valuation of an amortizing swap is no different in principle to a vanilla interest-rate swap; a single swap rate is calculated using the rele- vant discount factors, and at this rate the net present value of the swap cash flows will equal zero at the start of the swap.   Zero-Coupon Swap A zero-coupon swap replaces the stream of fixed-rate payments with a single payment at the end of the swaps life, or less common, at the begin-     ning. The floating-rate payments are made in the normal way. Such a swap exposes the floating-rate payer to some credit risk because it makes regular payments but does not receive any payment until the termination date of the swap.   Libor-in-Arrears Swap In a Libor-in-arrears swap (also known as a back-set swap), the reset date is just before the end of the accrual period for the floating-rate rather than just before the start. Such a swap would be attractive to a counterparty who had a different view on interest rates compared to the market con- sensus. For instance in a rising yield curve environment, forward rates will be higher than current market rates, and this will be reflected in the pricing of a swap. A Libor-in-arrears swap would be priced higher than a