A callable LIBOR exotic that helps investors leverage interest rates’ movements. This instrument, which is a zero-strike call on a reverse floater, is based on an underlying floating rate index to which the payoff (coupon) relates. If this index rises, the holder will pay less and receive more. But, in the opposite case, the holder has to pay more, while receiving less. In other words, the coupon is based on an reverse of a floating rate. The embedded call option will be exercised if the value of the reverse floater at expiration is positive (i.e., the option is in the money).
This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
Comments