Floating Price

The leg of a swap that is based on a fluctuating interest rate. In a plain vanilla interest rate swap, there are two streams of cash flows. Each stream is based on the same amount of notional principal, but one stream pays interest on that notional principal at a fixed rate (or fixed price) and one stream pays interest on the notional principal at a floating rate (or floating price).

While the fixed-rate stream does not change for the duration of the swap, the floating rate stream changes periodically. The floating rate will adjust as its benchmark interest rate, changes in accordance with market conditions. The benchmark is often LIBOR, but may also be the yield on one-year U.S. Treasuries or another interest rate. Two parties, called counterparties, enter into fixed-for-floating swap transactions to reduce their exposure to changes in interest rates or to attempt to profit from changes in interest rates.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Floating exchange rate — Floating rate may also refer to a floating interest rate applied to a loan or other lending product. A floating exchange rate or a flexible exchange rate is a type of exchange rate regime wherein a currency s value is allowed to fluctuate… …   Wikipedia

  • Floating rate note — Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a spread. The spread is a rate that remains constant. Almost all FRNs have quarterly coupons, i.e.… …   Wikipedia

  • Floating Battery of Charleston Harbor — The Floating Battery of Charleston Harbor was an ironclad vessel that was constructed by the Confederacy in early 1861, a few months before the American Civil War ignited. Apart from being a marvel to contemporary Charlestonians, it was a… …   Wikipedia

  • Floating currency — A floating currency is a currency that uses a floating exchange rate as its exchange rate regime. A floating currency is contrasted with a fixed currency.In the modern world, the majority of the world s currencies are officially but not really… …   Wikipedia

  • Price, George — ▪ 1996       U.S. cartoonist (b. June 9, 1901, Coytesville, N.J. d. Jan. 12, 1995, Englewood, N.J.), as a longtime contributor (1926 95) to The New Yorker magazine, depicted the absurdities of human nature in distinctive drawings that were… …   Universalium

  • Floating Rate Notes — Als Floater (Floating Rate Note, FRN) bezeichnet man eine Anleihe mit variabler Verzinsung, die an einen Referenzzinssatz wie zum Beispiel alle 3/6 Monate an den Libor oder Euribor gekoppelt wird. In manchen Fällen wird zusätzlich ein… …   Deutsch Wikipedia

  • Floating Stock — Shares of a company that are freely available for purchase by investors on the secondary market. The more shares of floating stock are available, the less volatile a company’s stock price is likely to be, and vice versa. Floating shares are …   Investment dictionary

  • Fixed Price — The leg of a swap that is based on an unchanging interest rate. A plain vanilla interest rate swap is an exchange of two streams of cash flows. Both streams are based on the same amount of notional principal, but one stream pays interest on that… …   Investment dictionary

  • Inverse floating rate note — An inverse floating rate note, or simply an inverse floater, is a type of bond or other type of debt instrument used in finance whose coupon rate has an inverse relationship to short term interest rates (or its reference rate). With an inverse… …   Wikipedia

  • Dirty price — The dirty price of a bond represents the value of a bond, exclusive of any commissions or fees. The dirty price is also called the full price or the all in price. Contents 1 Bond Pricing 2 Example 3 Footnotes 4 Refere …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.