Interest rate floor

From ACT Wiki
Jump to: navigation, search


An option which pays out to the holder if the reference interest rate falls below the strike rate on the maturity date, or on a series of pre-agreed dates.

The effect of hedging interest income with a floor is to establish a minimum level for the hedged interest income achieved.


The hedged interest income profile achieved by the use of an option in combination with an underlying interest income exposure.

See also