Floating-rate note (FRN) - Financial definition
Financial acronyms
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Concise definition of the term floating-rate note
A floating-rate note is a bond which, instead of paying a fixed cash flow, make coupon payments which are linked to some short-term interest rate index that resets at a regular interval.
Comprehensive definition of the term floating-rate note
As a result of the indexation of coupon payments on interest rate indexes, the most common references being Libor or Euribor, floating-rate have a lower exposure to interest rate risk.
As interest rates rise or fall the cash flows of the bond change to mirror the interest rate changes. These payments can be made for a period of time ranging from months to years.
As interest rates rise or fall the cash flows of the bond change to mirror the interest rate changes. These payments can be made for a period of time ranging from months to years.