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    Coupon Leverage

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    timothy454
    Coupon leverage is a multiplier that is used to determine the floating interest rate of an inverse floater by multiplying the reference rate. An example is provided of an inverse floater with a coupon leverage of 2, meaning its interest rate is calculated as 22% minus 2 times the 1-month LIBOR reference rate. Coupon leverage magnifies the effects of changes in reference interest rates on the interest paid by inverse floaters.

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    Coupon Leverage

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    timothy454
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    Coupon leverage is a multiplier that is used to determine the floating interest rate of an inverse floater by multiplying the reference rate. An example is provided of an inverse floater with a coupon leverage of 2, meaning its interest rate is calculated as 22% minus 2 times the 1-month LIBOR reference rate. Coupon leverage magnifies the effects of changes in reference interest rates on the interest paid by inverse floaters.

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    Coupon_leverage

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    Coupon leverage is a multiplier that is used to determine the floating interest rate of an inverse floater by multiplying the reference rate. An example is provided of an inverse floater with a coupon leverage of 2, meaning its interest rate is calculated as 22% minus 2 times the 1-month LIBOR reference rate. Coupon leverage magnifies the effects of changes in reference interest rates on the interest paid by inverse floaters.

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    © All Rights Reserved
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    39 views1 page

    Coupon Leverage

    Uploaded by

    timothy454
    Coupon leverage is a multiplier that is used to determine the floating interest rate of an inverse floater by multiplying the reference rate. An example is provided of an inverse floater with a coupon leverage of 2, meaning its interest rate is calculated as 22% minus 2 times the 1-month LIBOR reference rate. Coupon leverage magnifies the effects of changes in reference interest rates on the interest paid by inverse floaters.

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    © All Rights Reserved
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    Coupon leverage

    Coupon leverage, or leverage factor, is the amount by which a reference rate is multiplied to determine
    the floating interest rate payable by an inverse floater.[1] Some debt instruments leverage the particular
    effects of interest rate changes, most commonly in inverse floaters.[2]

    As an example, an inverse floater with a multiple may pay interest at the rate, or coupon, of 22 percent
    minus the product of 2 times the 1-month London Interbank Offered Rate (LIBOR).[3] The coupon
    leverage is 2, in this example, and the reference rate is the 1-month LIBOR.

    References
    1. "Coupon leverage" (http://www.riskglossary.com/letters/c.htm). Risk Glossary. Retrieved
    2008-06-18.
    2. Marshall, John Francis (2000). Dictionary of Financial Engineering: Over 2,000 Terms
    Explained. John Wiley & Sons. p. 51. ISBN 0-471-24291-8.
    3. "Coupon leverage" (https://web.archive.org/web/20110709020116/http://www.dgcommercial
    loans.com/glossary/c/coupon_leverage.html). DG Commercial Loans. Archived from the
    original (http://www.dgcommercialloans.com/glossary/c/coupon_leverage.html) on 2011-07-
    09. Retrieved 2008-06-18.

    Retrieved from "https://en.wikipedia.org/w/index.php?title=Coupon_leverage&oldid=944861734"

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