Floating Rate Notes

Floating Rate Notes

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.
Overview

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:

  • What are floating rate notes (FRNs)?

  • When is the interest paid on a typical 5-year FRN?

  • Why does the floating rate note have very little interest rate risk?

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Summary
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Expert
Lindsey Matthews

Lindsey Matthews

Lindsey runs Perfordiant, an investment risk and performance consulting firm. He has worked in financial markets since 1992. Lindsey became an MD in fixed income and equities, ran a Risk function, and was on the management team of an Asset Management fintech business. Lindsey is now a Visiting Fellow at the Henley Business School, and resides on the board of CFA UK.

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