Floating rate

Any method of paying interest that is periodically refixed in line with the current market rate.

Floating rate interest is not fixed for the life of the issue, but is periodically reset according to a predetermined formula.

Floating rate debt, for example, carries an interest rate which will vary as market interest rates vary.

(There is a time lag between the setting of the rate for each tranche of interest at the start of the interest calculation period, and its payment at the end of the interest period.)

See also

• Basis swap
• Drop-lock bond
• Exposure period
• Fixed rate
• Floating exchange rate system
• Floating rate payer