Interest rate floor

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Revision as of 08:57, 1 August 2015 by imported>Doug Williamson (Align with qualifications material.)
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1.

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.


2.

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


See also