PPT Slide

Range notes

Coupon rate is equal to the reference rate as long as the reference rate

is within a certain range at the reset date. If the reference rate is outside

of the range, the coupon rate is zero for that period.

Inverse floaters

Coupon rates are reset periodically according to

K - L ? reference rate.

To prevent the coupon rate to fall below zero, a floor value of zero is

usually imposed.

In general, an inverse floater is created from a fixed rate security –

called collateral. Actually, from the collateral, two bonds are created:

a floater and an inverse floater.