It stands for spread range accrual note; a range note in which the coupon depends on the spread between the daily fixings of two interest rate indexes being within a specific range. For example, the spread may be based on the LIBOR-CMS differential. This note is attractive to investors at times the market is expected to see wide movements in the underlying spread. The coupon goes hand in hand with the volatility of the spread and the possibility of it sliding outside the range.
August 20, 2024
