30 years: Risk management & derivatives trading
In this video, Lindsey moves away from explaining fixed rate investments and discusses floating rate notes, or FRNs, which issues a coupon based on a moving interest rate.
In this video, Lindsey moves away from explaining fixed rate investments and discusses floating rate notes, or FRNs, which issues a coupon based on a moving interest rate.
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6 mins 10 secs
Floating rate notes are essentially long-dated instruments, where the investor is repaid principal at the final maturity and receives a periodic coupon which changes with interest rate levels. It is also worth noting, FRNs are less susceptible to interest rate risk.
Key learning objectives:
Define floating rate notes (FRNs)
Understand when interest is paid on a typical 5-year FRN
Understand why the floating rate note has very little interest rate risk
Access this and all of the content on our platform by signing up for a 14-day free trial.
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