Business and Personal Finance Dictionary

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• ONE WAY FLOATING RATE NOTE
  
  Definition: A Floating Rate Note whose rates can only ratchet up (usually) or down. Also known as One Way Collared Note, One Way Floater, Ratchet Floater, and Sticky Floater. (Source: Peng, Scott, and Dattatreya, Ravi, The Structured Note Market.) Example: A Floating Rate Note that pays a quarterly coupon that is at least the previous period’s LIBOR, at most 50 bips (q.v.) above the previous LIBOR, and equals LIBOR if LIBOR falls between these bounds. Application: This is mainly a vehicle for speculation, because it is difficult to name something that it hedges. Pricing: The payoff is path dependent, and the most obvious way to price it is with Monte Carlo simulation. (See Peter Fink’s discussion at http://www.sbcm.com/hot/current.htm)
  
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