Super Floater

AAA

DEFINITION of 'Super Floater'

A floating-rate collateralized mortgage obligation (CMO) tranche whose coupon rate is determined by a formula based on an interest-rate index such as LIBOR. The coupon rate is leveraged i.e. it moves more than one basis point for each basis point change in the index.


A super floater can also refer to a leveraged floating rate note whose coupon rate changes are magnified (ratio greater than one) when the reference interest rate or index changes. Since their coupon rate moves in the same direction as interest rates, super floaters are suitable investments in a rising interest-rate environment.

INVESTOPEDIA EXPLAINS 'Super Floater'

As an example, a super floater coupon may be determined by the following formula: 2 x (one-year US$ LIBOR) - 4%. So if the one-year LIBOR is 3%, the coupon rate would be 2 x 3% - 4% = 2%. To prevent the coupon rate getting negative, a floor rate on the coupon is usually specified.

RELATED TERMS
  1. LIBOR

    LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ...
  2. Collateralized Mortgage Obligation ...

    A type of mortgage-backed security in which principal repayments ...
  3. Floating-Rate Note - FRN

    A note with a variable interest rate. The interest rate is usually ...
  4. Leveraged Floater

    A security, generally a bond, which has a leverage factor of ...
  5. Floater

    A bond or other type of debt whose coupon rate changes with market ...
  6. Tranches

    A piece, portion or slice of a deal or structured financing. ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  2. Investing

    Is the Best Plan for Pot Investing 'Wait-and-see?'

    Legalized marijuana is an emerging industry and those interested in investing in it should proceed with caution.
  3. Economics

    What Would Happen If Interest Rates Rise?

    This time around, while U.S. long-term yields have rebounded from their January lows, rates have generally been lower than where they ended 2014.
  4. Investing

    Strategies To Position Your Bond Portfolio

    Fixed income investors may not be able to see them all right now, but important trends are stirring on the investment horizon.
  5. Credit & Loans

    How To Become a Mortgage-Backed Securities Analyst

    Specializing in structured or derivative credit products like mortgage-backed securities requires education and prior experience in the mortgage field.
  6. Savings

    How To Make Money With Airbnb: Risks & Rewards

    Airbnb lets you turn your home or spare room into extra cash. Here's how to make money and protect yourself from the risks.
  7. Mutual Funds & ETFs

    Tired Of Mutual Funds? Try This Alternative

    Mirrored investments services are a beneficial alternative to traditional mutual funds. Discover how they work and how they can be used to your advantage.
  8. Mutual Funds & ETFs

    Consider This High-Yield ETF's Risks and Rewards

    Finding quality high-yield opportunities isn’t easy, but the YieldShares High Income ETF (YYY) has potential.
  9. Investing

    What are Fixed-Income Securities?

    For a fixed-income security, the periodic return on the investment is the same throughout the life of the security. Principal is returned at the time of maturity. The payment can be in the form ...
  10. Mutual Funds & ETFs

    Top Emerging Markets Dividend ETFs

    These dividend ETFs offer similar — yet different — ways to play emerging markets.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center