I am going through CFAI Fixed Income Text and came across floating-rate tranches. I don’t see them in the LOS and I don’t remember them in the Schweser texts. Drop them?
drop it like its hot
Usually one of the subordinated classes in the CDO’s are floating rate. The senior is fixed. Then there is the accrual equity tranche that gets whats left over.
The text refers to Floating-rate Tranches in a CMO structure. This is when you have a floater and an inverse floater to offset it.