Discount Margin
Discount Margin (DM) is the fixed spread over a reference rate used to discount the expected cash flows of a floating-rate instrument to its price.
Example: An FRN with a three-month reference rate such as SOFR plus a fixed margin has its cash flows discounted using SOFR + DM; if the implied DM is 0.60%, the model would discount future payments at SOFR + 0.60% to estimate present value.
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