A floating-rate note (FRN) that grants issuers and investors the right to convert from a floating rate of interest to a fixed rate or vice versa. For example, an investor may have an option to convert from a floating rate to a fixed rate when market rates falls below a specific level. Similarly, an issuer may be entitled to convert from a floating rate to a fixed rate when market rates exceed a given limit. This convertibility feature allows issuers and investors to hedge against unfavorable future interest rate movements and to take views on interest rates.

A convertible-rate FRN is also referred to as a convertible-rate floater.