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Collared FRN with Participating Caps and Floors


An FRN that is embedded with increased participation mechanism. 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 – LIBOR)



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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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