Floater
A bond or other type of debt whose coupon rate changes with market conditions (short-term interest rates). Also known as "floating-rate debt". Investopedia Says:
For example, a floater bond may have the coupon rate set at "T-bill rate plus 0.5%".
This type of instrument is more beneficial to the holder as interest rates are rising because it allows the holder to participate in the upward movement in rates. Conversely a floater is less advantageous to the holder when rates are decreasing because the rate at which they are receiving interest is declining. Related Terms:
Bond
Cap
Coupon Rate
Fixed-Income Security
Inverse Floater
Lifetime Cap
Reference Rate
Residual Interest Bonds - RIBS
Teaser Rate
Treasury Bill - T-Bill |