Business and Personal Finance Dictionary

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• INVERSE FLOATER
  
  A Floating Rate Note with a coupon that decreases as the underlying index rate increases (e.g., a simple Inverse Floater's coupon rate might be 11.5% minus LIBOR). The Replicating Portfolio (q.v.) for a simple Inverse Floater is long a pair of Fixed Rate Notes and short a Floating Rate Note. Commonly, an Inverse Floater's coupon has a ceiling and a floor, (e.g., no more than ten percent, never negative). Thus, its replicating portfolio is the same as for a simple Inverse Floater, plus long a Cap and short a Floor.
  
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