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Inverse floater
       
 
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Inverse floater

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Inverse floater
The payments made on an inverse floating rate note (‘floater’) decrease as the reference Interest rate increases, the reverse of the typical case where the payments rise with the reference rate. The purchaser of an inverse floating rate note is in effect selling Interest rate caps – this Will increase the Coupon payments in a stable or lower Interest rate environment, but reduce them should Interest rates rise. Typically, the payment is found by a Fixed Rate minus two times the reference rate.The floater can be further leveraged by using a multiplier higher than two.
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