A floater that involves a short position in a strip of caps over the life of collateralized motgage obligation (CMO) security, with a predetermined strike (the strike at the floating rate level where the cap is hit).
CMO floater = long position in a floater + short position in a strip of caps subject to a given strike
CMO floaters provide investors with safe investment venues and attractive spreads. Mainly, these investments suit the requirements of low risk-apetite investors (e.g., small-sized institutions).
