The investor who buys the right to enter into an interest rate floor will receive a payoff when the interest rate on the underlying floating-rate note falls below a certain level. If the floating rate does not fall below a certain rate, then the investor can exercise his or her right to not purchase the interest rate floor at the premium.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
floortion — An option that grants the holder the right to purchase a floor. American Banker Glossary … Financial and business terms