A debt instrument (such as a bond, note, etc) in which the coupon rate depends on some multiple of the change in the reference rate. This has the effect of magnifying any changes in the value of the reference rate. For example, the coupon rate of a superfloater bond may be based on the following formula (where LIBOR is the floating rate):

(initial LIBOR – 50 bps) + 2 × (change in LIBOR)

If the initial LIBOR is 6% and the change in LIBOR (in basis points) is -200, -100, 0, +100, and +200, then:

Superfloater coupon rate = (6% – 0.5%) + 2 (-2%) = 1.5%

Superfloater coupon rate = (6% – 0.5%) + 2 (-1%) = 2.5%

Superfloater coupon rate = (6% – 0.5%) + 2 (0) = 5.5%

Superfloater coupon rate = (6% – 0.5%) + 2 (1%) = 7.5%

Superfloater coupon rate = (6% – 0.5%) + 2 (2%) = 9.5%

The yield of a superfloater bond is much higher than that of a standard floater when interest rate increases and much lower when interest rates fall or remain unchanged.