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In-the-money 2.
Said of a swap considered from the viewpoint of the counterparty for which it has a positive value.
A coupon swap is in the money for the fixed-rate receiver when, following an interest rate drop, the present value of the interest flows receivable on the fixed leg exceeds the present value of the interest flows payable in exchange on the floating leg, calculated on the basis of a yield curve. A coupon swap is in the money for the fixed-rate payer when, following an interest rate increase, the present value of the interest flows receivable on the floating leg, calculated on the basis of a yield curve, exceeds the present value of the interest flows payable in exchange on the fixed leg.