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inverse floater |
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Inverse floater A derivative instrument whose coupon rate is linked to the market rate of interest in an inverse relationship.
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The bulletin also describes the most common types of structured notes, including step-up bonds, index amortizing notes, dual index notes, deleveraged bonds, range bonds and inverse floaters. They're risky because they're frequently leveraged, meaning that for every half point change in interest rates, the coupon on the inverse floater could change by a factor of two, three or even four times. However, the increased concentration of inverse floaters may cause the portfolio's weighted average coupon to suffer as interest rates rise. |
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