Long Inverse Floating Exempt Receipt - LIFER

AAA

DEFINITION of 'Long Inverse Floating Exempt Receipt - LIFER'

A floating rate debt security traded among qualified institutional buyers (QIBs) and originated by German financial firm Deutsche Bank. The receipts pay a yield equal to a fixed base interest rate minus the floating rate of a benchmark (such as LIBOR+). As such, the interest rate paid moves inversely to the direction of the variable rate itself.

INVESTOPEDIA EXPLAINS 'Long Inverse Floating Exempt Receipt - LIFER'

LIFERs fall under municipal structured finance; the underlying cash flows for the receipts are provided by municipal authorities, such as airports, roads and schools. These securities are generally exempt from registration with the SEC under a provision in the Securities Act of 1933 known as Rule 144A. Bearer-bond versions (that offer no coupon) are also allowed for trade in the U.S. under Regulation S.

LIFERs are considered more volatile than vanilla floating-rate notes, as the fixed rate of the contract will be set higher than the typical ranges of the (variable) benchmark, and often by a larger margin than the benchmark is from zero. Their complexity and increased risks are why they are only traded among QIBs.

RELATED TERMS
  1. Floating Interest Rate

    An interest rate that is allowed to move up and down with the ...
  2. Qualified Institutional Buyer - ...

    A corporate entity that falls within the "accredited investor" ...
  3. Bearer Bond

    A fixed-income instrument that is owned by whoever is holding ...
  4. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
  5. Securities Act Of 1933

    A federal piece of legislation enacted as a result of the market ...
  6. Rule 144A

    A Securities & Exchange Commission rule modifying a two-year ...
Related Articles
  1. Options & Futures

    An Introduction To Structured Products

    Learn a simple way to bring the benefits of derivatives into your portfolio.
  2. Bonds & Fixed Income

    How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.
  3. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  4. Taxes

    Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.
  5. Taxes

    Weighing The Tax Benefits Of Municipal Securities

    Find out how to determine whether the tax exemption offered by "munis" benefits you.
  6. Options & Futures

    These Financial Products Are Too Complex For The Average Joe

    Structured financial products are so elaborate that investors are unable to assess costs and risk.
  7. Bonds & Fixed Income

    How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par value, market price and yield.
  8. Bonds & Fixed Income

    Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate in the secondary market.
  9. Economics

    How does a high discount rate affect the economy?

    Find out what would happen if the Federal Reserve decided to set a very high discount rate, the rate at which banks can borrow money from the Federal Reserve.
  10. Trading Strategies

    How long will it take for a savings bond to reach its face value?

    Learn essential information about U.S. savings bonds along with an explanation of the unique characteristics of this popular investment instrument.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center