Feb 182017
 

A floating rate note in which the interest is a fixed rate minus libor. e.g. the rate might be 10% – libor. Investors buy it because they believe libor will fall faster than the curve implies. It can also be structured as a Double Libor Reverse FRN e.g. it might pay 15% – (2 x libor). This gears up the return for the investor compared with a normal reverse FRN. A Fixed Reverse FRN would pay a fixed rate for a specified number of years and then a fixed rate minus libor coupon.

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