A floating-rate note (floater) that comes with a changing quoted margin. That means the quoted margin changes at certain intervals during the term of the floater. However, the quoted margin could either step to a higher or lower level over the floater’s life. For instance, the coupon formula for a stepped spread floater could be, from issuance until a specific point during its life:
Coupon rate = 3-month LIBOR + 50 basis points
From that point in time until maturity, the quoted margin may be stipulated to step up to 100 basis points (or to step down to 30 basis points).
Comments