A corridor floater – also known as a range note, fairway note or accrual note – is a structured note paying an above-market rate for each day the underlying spot rate stays within a specified range (the accrual corridor). This higher yield is achieved by effectively selling an embedded corridor option. The corridor may be reset on given dates, either by the buyer or according to the prevailing value of the reference rate.
If the underlying trades outside the corridor, the investor receives no interest for that day. Alternatively, the instrument may be knocked out altogether – this is a barrier floater or knock-out range note. The holder will therefore benefit in stable market periods when volatility is low and the underlying is more likely to stay within the corridor.
The Energy Risk Glossary, now in its eighth edition, provides an at-a-glance explanation of the myriad specialised terms and acronyms used in energy trading and risk management.
This year, the guide has been updated by Aviv Handler of ETR Advisory. Energy Risk would like to thank him for his input into this edition, which benefits greatly from his valuable experience and insight into energy markets.
The fast-changing nature of these markets means much has changed since our last edition – almost 200 new entries and revisions have been made this year. Reflecting the increasing importance of regulation, definitions of the Markets in Financial Instruments Directive (MiFid) and the Ljubljana-based Agency for the Cooperation of Energy Regulators (Acer) make it into the glossary for the first time. A focus on improving back-office infrastructure and mitigating counterparty risk is also apparent from the inclusion of terms such as ‘portfolio reconciliation’ and ‘portfolio compression’.
The glossary is extensively cross-referenced, making for easy and thorough searches. We hope you find it useful.
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