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Bear Floater


A structured security (a floater or floating rate noteFRN) which allows an investor to take advantage of increasing interest rates. Thus, the interest rate is periodically readjusted at a multiple of the difference between a specific floating reference rate and a predetermined fixed rate. And hence, the floating rate leg rises or falls accordingly by a multiple of the change in the floating reference rate. An investor using a bear floater can take a leveraged position on the upward movement in short-term interest rates. A bear floater works well for an inverted yield curve where short-term rates tend to be higher than long-term rates.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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