Collared Floater with Participating Caps and Floors

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Collateralization

March 27, 2021
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Collared Swap

March 27, 2021

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An floater that is embedded with increased participation mechanism (such as that of a participating cap/ participating floor). In other words, the holder can get more participation levels as the cap strikes rise for each successive coupon period. The payoff is given by:

Payoff= cap strike – participating rate * (strike rate – floating rate)

The floating rate is a market reference rate for floating interest rates (e.g., LIBOR).

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