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Leveraged Reverse Floating-Rate Note


A reverse floating-rate note (reverse floater) in which the multiplier of the fixed rate is set, at the time the position is created (at the time of issue), at a level greater than 2 (λ > 2), whilst the floating reference rate is magnified by that multiplier minus 1.

Rate on leveraged reverse FRN = λ (fixed rate) – (λ -1) reference rate

The leverage is reflected in the coupon which increases at least twice as fast as the decline in yields. This produces a payoff to the note that responds more than proportionately in reverse to changes in floating rates.

It is also known as a leveraged reverse floater.



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