interest rate floor
The opposite of an interest rate cap. An arrangement under which the seller, in return for a premium, will pay to the buyer the difference between the specified floor rate and the lower variable rate, should the variable rate fall below that floor. The buyer therefore covers the gap between the variable rate and the higher fixed rate it would have had to pay in the event that new interest rates fall. This protects investors from falls in rates while allowing them to take the benefit of rises.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

Look at other dictionaries:

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  • Floor (disambiguation) — Floor may refer to one of the following: In buildings: Floor, the lower surface of a room; and the supportive subfloor, the layer which structurally provides the strength and support for the flooring above commonly miscalled the floor . Storey, a …   Wikipedia

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