Floating Rate Notes
Floating Rate Notes (FRNs) are financial instruments that fall under the broader categories of Finance and Debt Financing. They represent debt obligations issued by entities, typically corporations or government agencies, to investors. These notes have interest rates that reset periodically based on a benchmark rate such as the London Interbank Offered Rate (LIBOR). The primary feature of FRNs is their floating interest rate, which adjusts with changes in market conditions and reduces the issuer's exposure to interest rate risk compared to fixed-rate debt. Investors in FRNs benefit from potentially higher yields when interest rates rise, but also face the risk of lower returns during periods of falling rates.