A little bit confused about the reseting of floaters.
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For example, the floater might reset its interest rate quarterly at three-month Libor plus 0.50%.
(Institute 422)
Institute, CFA. 2016 CFA Level I Volume 5 Equity and Fixed Income. CFA Institute, 07/2015. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
and
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On each quarterly reset date, the floater will be priced at par value.
(Institute 422)
Institute, CFA. 2016 CFA Level I Volume 5 Equity and Fixed Income. CFA Institute, 07/2015. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
So when do floaters actually reset? I would have thought that they reset whenever the LIBOR changes for example which would change on perhaps a minute by minute basis depending on where it’s trading at the moment. Or is this decided upon between the counterparties in the indenture? So all movemenet in the LIBOR between the agreed upon dates are ignored?