Structured Coupon

spinoza · August 9th, 2004, 12:51 pm

Hi,can someone help me with this coupon: Min (Libor3M + 4% , 12% - Libor3M)how can i express this coupon in cap/floor/swap?Thx

zzbool · August 9th, 2004, 1:26 pm

For that payoff, your floor would be 4% and your cap would be 12%. (12% - Libor 3M) is a reverse floater and (Libor 3M + 4%) is a straight floater.

spinoza · August 9th, 2004, 2:42 pm

i dont think it's so easy

slevin · August 9th, 2004, 5:21 pm

it is nothing more then a long fixed leg with 8% cpn and a short cap/floor straddle struck at 4%.

Paka · August 10th, 2004, 7:36 am

Slevin: "it is nothing more then a long fixed leg with 8% cpn and a short cap/floor straddle struck at 4%. "I believe it also include a long call at 12% (to prevent negative coupon)Paka

slevin · August 10th, 2004, 1:38 pm

Paka:min(L + 4, 12 - L) != max(0, min(L + 4, 12 - L))