Inverse floating-rate note

(redirected from Reverse Floater)

Inverse floating-rate note

A variable-rate security whose coupon rate increases as a benchmark interest rate declines.

Inverse Floating-Rate Note

A bond or other debt security with a variable coupon rate that changes in inverse proportion to some benchmark rate. For example, an inverse floating-rate note may be linked to LIBOR; as the LIBOR decreases, the coupon rate increases and vice versa. An inverse floating-rate note allows a bondholder to benefit from declining interest rates. It is also called an inverse floater.
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The use of reverse floaters to create a profit for investors when interest rates decline
Unlike standard FRNs, reverse floaters create a profit for the investor when interest rates decline.