The general coupon for- mula for an inverse floater is:   K - L ´ (Reference rate).   From the formula, it is easy to see that as the reference rate goes up (down), the coupon rate goes down (up). As an example, consider an inverse floater issued by one of the Fed- eral Home Loan Banks in April 1999 due in April 2002. This issue delivers quarterly coupon payments according to the formula:   18% - 2.5 ´ (3-month LIBOR)   In addition, this inverse floater has a floor of 3% and a cap of 15.5%. Note that for this floater the value for L (called the coupon leverage) in the coupon reset formula is 2.5. Assuming neither the cap rate nor the floor rate are binding, this means that for every one basis point change in 3-month LIBOR the coupon rate changes by 2.5 basis points in the opposite direction. When L is greater than 1, the security is referred to as a leveraged inverse floater. Unfortunately, some money market investors have purchased inverse floaters based on the belief that these floating-rate products provide a hedge against a decline in interest rates. While the coupon rate does increase when the reference rate decreases, inverse floaters have the unfa- vorable property that their durations are typically very high. That is, they typically have high effective durations, a characteristic not understood by managers who still view "duration" in temporal terms (i.e., in terms of years). Certainly, these two features of an inverse floater-higher coupon rate when rates decline and substantial price appreciation due to a high effective duration-are appealing to a manager who wants to bet on a downward movement of rates. But clearly, this is not the approach that should be pursued by a manager who seeks to maintain a stable value for aportfoliowhenrateschange.       2Here, the term flat means without a quoted margin or a quoted margin of zero.     Other Types of Floaters There is a wide variety of floaters that have special features that may appeal to certain types of investors. For example, some issues provide for a change in the quoted margin (i.e., the spread added to or sub- tracted from the reference in the coupon reset formula) at certain inter- vals over a floaters life. These issues are called stepped spread floaters because the quoted margin can either step to a higher or lower level over time. Consider Standard Chartered Banks floater due in December