A coupon reset is the point at which the interest rate on a bond is fixed again for the next interest period. It applies mainly to a floating rate note, whose coupon equals a floating rate index plus a fixed margin, and to fixed-to-floating or resettable bonds. The terms name the index, the margin, the reset dates and the day on which the index is observed.
On each reset date a calculation agent reads the reference rate, adds the margin, applies any cap or floor and announces the new rate. With overnight rates such as SOFR, the rate is often compounded over the period and known only near its end. The operational steps are described under reference rate reset. Resets keep the bond's price close to par, which limits interest rate risk for the holder.