Derivatives
Floor
Definition
What is Floor?
An interest-rate derivativeA contract whose value depends on an underlying asset, rate, index, or event. that limits the minimum rate received by an investorA person or organisation that commits capital with the expectation of a financial return. or lender.
Example in practice
How This Looks in Practice
The floor pays when the reference rate falls below 5%.
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Related Terms
Derivatives
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesUnderlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.