Discount margin

CFA Level I Glossary

Discount margin is the spread that equates a floating-rate note’s market price to the present value of its projected cash flows. If DM is above the quoted margin, the FRN typically trades at a discount to par; if below, it trades at a premium. Quoted margin is the contractual spread over the reference rate; DM is the market’s required spread given price. Mixing quoted margin with discount margin is the usual error.

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