Glossary of Municipal Securities Terms


A swap agreement entered into by an issuer or obligor with a swap counterparty in connection with variable rate debt that combines an interest rate cap and an interest rate floor. Such arrangement is typically used to establish a minimum and maximum interest rate range that defines the payment obligations of the swap parties with respect to the swap. The obligor remains responsible for the payment of debt service on the bonds and typically will apply payments received under the collar to offset such payments. See: INTEREST RATE CAP; INTEREST RATE FLOOR.

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