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Derivatives

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  • October 7, 2020
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Coupon Indexed Floater

A floating-rate note (floater) in which the periodic coupon depends on the performance of some embedded option with an underlying index such as equity, currency, commodity, etc. For example, suppose the current coupon of a floater is 6% and an underlying commodity index has a value of 1500. If, at the next fixing date, the underlying index rises to 1600, then the new coupon rate will be readjusted upward, say, to 6.1%.

This instrument is also known as a multiperiod strike reset option (MSRO) or a coupon-indexed note.


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