Leveraged Inverse Floating Rate Note

Accounting
Depreciated Cost
January 13, 2022
Finance
Inverse Floating Rate CMO
January 13, 2022

An inverse floating rate note whose coupon moves inversely with respect to interest rates by more than one for one. The note is equipped with a coupon leverage– i.e., the reference rate’s multiplier that exceeds one. The magnitude of interest rate changes is more than proportionate, meaning that the effect on coupon payment will be multiplied by the coupon leverage.

It is also known as a geared reverse convertible.

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