Derivatives

Swap Rate Yield Curve

March 12, 2021
Finance

High-Low Floating Rate Note

March 12, 2021

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A floater which is designed as a yield enhancement instrument. It has a premium rate that is equal to a reference index rate (market rate), subject to a cap level. If the market rate increases beyond the cap rate, the floater turns into a reverse floater. The floater’s yield decreases as the market rate appreciates.

This floater is typically sought by investors who expect floating rates would only stage a modest increase over the span of the instrument.

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