Reverse Floating Rate Note

Anatomy of a Five-Year Reverse Floating Rate Note
A popular floating rate note structure in which the rate paid increases as market floating rates decline. In a typical case, the rate paid on the note is set by doubling the swap rate (fixed rate) in effect at the time the contract is signed, and subtracting the floating reference index rate for each payment period. If floating rates fall, the result of this calculation will be a higher return on the reverse floating rate note. If floating rates rise, the payment on the reverse floating rate note will decline. Also called Maximum Rate Notes, Bull Floater, Bull Floating Rate Note, INverse FLOating Security (INFLOS), Indexed INverse FLOating Rate Security (Indexed INFLOS), Yield Curve Note, Inverse Floater. See also Bull and Bear Notes, Superfloater Swap, Structured Note, Power Bond, Floating Rate Note (FRN), Indexed Inverse Floater, Leveraged Reverse Floating Rate Note. Compare with Bear Floater (diagram).