Derivatives

Knock-In Knock-Out Forward

August 31, 2022
Finance

Effective Rate of Interest

September 2, 2022

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A barrier FRN in which the coupon is deactivated (knocked-out) if the reference interest rate exceeds or falls below a prespecified barrier level. This instrument allows investors to take a view on the movement of interest rates above or below a desired threshold level, after which coupon payment (whether payable or receivable) becomes ineffective.

A knock-out FRN is also known as a knock-out floater.

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