ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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INVERSE FLOATING RATE Definition
- INVERSE FLOATING RATE
INVERSE FLOATING RATE is a security that has a fixed maturity with a coupon rate that is reset at a pre-specified amount, minus a given short-term rate or index, such as 18% minus the six-month LIBOR rate, or 30% minus three times the 30-day commercial paper composite rate. These instruments provide a way to hedge against lower short-term rates and/or a steeper yield curoe without extending the maturity. As shortterm rates decline, the coupon rate increases.
