 Exotics are complicated blends of tabs, tutors, forwards and options and sometimes these blends give surprising results to their buyers. Let's see how these blends work. A floater may be an inverse floater. This means that this type of floater fluctuates inversely with some rates like LIBOR. For example, a floater might pay an interest rate of 20% minus LIBOR to its buyer and if the LIBOR rate 9% then the inverse will be paying 11% and if the LIBOR rate is 12% the inverse will be paying 8%. This means that the purchaser of an inverse can profit from inverse only if the interest rates fall. There are supercharged versions of inverse and floaters. For floaters, this supercharged version is termed as super floater and for inverse, the supercharged version is termed as super inverser as this inverse fluctuates more than one for one time movement in the interest rates. Let's see an example of super inverse floater. It pays let's say an interest rate of 30% minus twice of LIBOR. Now if the LIBOR is 10% then it will be paying 10% and if the LIBOR is 7% then inverse will be paying 16% which is higher by 6% over our previous example. Sometimes derivatives and options can be combined in order to bound the impact of interest rate within a certain range and these two bounds are termed as CAP and FLOR. Interest rate CAP means the highest possible rate a borrower needs to pay whereas the interest rate FLOR is the minimum interest rate that may be charged to a borrower under a loan contract. For example, how borrowing under CAP will work? A firm gets short term loan at 7% CAP. Now the firm is concerned about any rise in the interest rates so the firm goes for LIBOR as a reference rate of interest for the CAP. If the CAP will pay to the firm if the interest rate goes beyond 7% means if the LIBOR is greater than 7% and if the LIBOR is lesser than 7% the firm will get nothing. This means that as the firm is buying the CAP the firm has assured that it will not have to pay over 7% to the lender. The second case we have lending under FLOR. Let's see how this works for the lender. A bank is lending short term at 7% FLOR. The bank is concerned with the expected fall in the interest rates in the market so the bank buys a FLOR to protect itself from such expected drop in the interest rates. If the LIBOR is lesser than 7% means if LIBOR falls by lesser than 7% the FLOR will be paying to the bank the differential amount and if the LIBOR goes high over 7% the bank will receive nothing. This means the buying of FLOR by the bank has assured the bank that the bank will not receive interest lesser than 7% in this particular loan agreement.