Glossary of Municipal Securities Terms

INVERSE FLOATER

variable rate derivative security whose coupon rate changes in the opposite direction from the change in the reference rate used to calculate the coupon rate. Inverse floaters are issued in conjunction with floaters, with the variable rate on the inverse floater equal to a fixed percentage rate less the then-current rate (i.e., the reference rate) on the floater. Thus, the rate on the inverse floater increases as the rate on the floater decreases, and vice versa. See: LINKED SECURITIES. Compare: FLOATER.

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