A floating-rate note (floater) in which the coupon is determined entirely or to a large extent by an embedded range accumulation option. The coupon rate is equal to the reference rate as long as the reference rate is confined to a specific range at the reset date. If the reference rate slips outside of the range, the coupon rate would be zero for that period.

The payoff can be determined based on a wide range of underlying indexes or rates: equity indexes, interest rates, currency exchange rates, etc. This instrument is used essentially to enhance interest yields when an investor is certain or confident of an index or rate movement. A prime example of range floaters is the LIBOR range notes.

The range floater (or range floating-rate note) is a structured note. It is also known as an index range note, a fairway bond, a fairway floater, a daily range accrual, etc.

For more details, see: range floater- an example.