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Derivatives

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  • November 7, 2021
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Stepped Capped Floating Rate Note

A type of capped floored floating rate note in which the capped coupon varies over the life of the note/ bond. An example is a bond that pays a floating coupon that is subject to a cap rate (say 6%) whose level is stepped (up) from time to time: it adjusts by steps of 0.3% upward. This floating rate note helps an investor adjust a previously set cap even higher depending on prevailing market rates at the time.


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