Definition for : Co-managers
Co-managers play a limited role in a placing transaction, losses incurred in relation to an insured Risk, (i) often after a "Deductible" amount which is non-repaid; and (ii) with or without a Cap (maximum) being put in relation to the disburseme the sale of a Floor, thus setting a zone of fluctuation in Interest rates, below which the operator must pay the difference in rates between the Market rate and the Floor rate and above which his counterparty pays the difference between the Market rate and the Cap rate. This combination reduces the Cost of Hedging, as the Premium of the Cap is paid partly or totally by the sale of the Floor. Also called Rate tunnel.
(See Chapter 26 Value and corporate finance of the Vernimmen)
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