Floating-Rate Notes (FRN)

A fixed income instrument where interest payments are not fixed, but vary according to a reference interest rate.

An interest margin is usually added to compensate the lender for the credit risk that the lender undertakes.

A floating-rate note can be viewed as a type of participation instrument.   Its payoff can be viewed as a regular fixed coupon note, combined with interest rate forwards.  

Pricing FRN: See Discount margin

Also Known As:
Floaters
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