floating-rate note

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Related to Floating Rate Securities: Variable Rate Bond

Floating-rate note (FRN)

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Floating-Rate Note

A bond with a variable interest rate. These bonds typically have coupons renewable every three months and pay according to a set calculation. For example, a note may have an interest rate of "EURIBOR + 1%" and pay whatever the EURIBOR rate happens to be at the time plus 1%. Some FRNs have maximum and minimum interest rates, known as capped FRNs and floored FRNs, respectively. An FRN with both a maximum and a minimum interest rate is called a collared FRN. In the United States, government sponsored enterprises issue most FRNs while banks do the same in Europe. See also: Adjustable-rate mortgage.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

floating-rate note

An unsecured debt issue with an interest rate that is reset at specified intervals (usually every six months) according to a predetermined formula. Floating-rate notes usually can be redeemed at face value on certain dates at the holder's option. Floating-rate notes pay short-term interest and generally sell in the secondary market at nearly par value. Floating-rate notes are indicated in bond transaction tables in newspapers by the symbol t. Also called floater, variable-rate note. See also convertible floating-rate note, droplock bond, variable-rate demand obligation, yield curve note.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Hillmeyer points to two main reasons for the appeal of floating rate securities: minimal interest rate sensitivity because of their low duration and the fact that they earn increasing rates of income as interest rates rise.
Table 2 shows examples of positions that can be covered by strategies for the hedging of currency risk, interest rate risk (on fixed rate securities) and cash flow risk (on floating rate securities).
He covers basic financial arithmetic, cash flows, bonds calculations, bonds risks, floating rate securities, amortization and depreciation, swaps, forward interest rates, futures, foreign exchange, options and real options, valuation, leasing, and basic statistics.
Decreases in cash flows resulting from resets on floating rate securities are not taken into account in this test provided the security is not a super-floater or an inverse floater.
Jennings: I think insurance companies are responding by investing in floating rate securities, investing in preferred securities, or different asset classes that are diversifying their portfolio.They're not tied to fixed-rate securities while there's a rising interest rate market.
Asset managers deal with these risks in a variety of ways, such as using proprietary and off-the-shelf software, doing credit analyses of individual securities and creating laddered portfolios or investing in floating rate securities to lessen the possible impact of interest rate spikes.
Certainly there is more interest now in assets that provide interest rate diversification, and things that may not react so poorly in a rising rate environment such as alternatives, floating rate securities and bank loans.
Rotatori finds value in floating rate securities and mortgage finance.