Interest rate floor

How it is used

Clarify whether floor refers to a loan term or a separate derivative contract.

Example sentences

1. The interest rate floor kept the loan's reference rate from falling below zero.

   The contract sets a lower boundary for the applicable rate.

2. The investor bought an interest rate floor to protect floating-rate income.

   The derivative can compensate for rates below its strike.

Common collocations

• contractual interest rate floor
• purchase an interest rate floor

Related terms

• variable rateAn interest rate that can go up or down during a loan or deposit term, usually because it follows a benchmark rate.
• derivativeA financial contract whose value depends on the price of something else, such as a currency, interest rate, share or commodity.

More terms: Interest & Exchange Rates

• interest rate
• fixed rate
• APR
• exchange rate
• foreign exchange
• compound interest
• maturity
• basis point
• policy rate
• inflation
• spread
• accrue