A floating-rate note (floater/ FRN) in which the reference rate is magnified by a factor λ (where λ > 1). Therefore, the rate on this note is the difference between the multiple-adjusted reference rate less a fixed rate or spread:
Rate on leveraged FRN= λ (reference rate) – fixed rate
The first expression represents the coupon of the note (usually it is a multiple of a specific market interest rate such as LIBOR). This instrument allows investors to receive an above-market initial yield, while linking subsequent coupon adjustments to a given point on the yield curve.
It is also known as a leveraged floating rate note, a super floating rate note, or a supercharged floating rate note.
