Interest Rate Floor Definition & Meaning | Financial Term | CSIMarket
CSI Market
Sign In | Register

Glossary

Interest Rate Floor

Financial Term

An interest rate floor refers to the minimum interest rate that investors or borrowers can earn or pay on a financial instrument. It is a type of financial contract that sets a minimum interest rate on an investment, such as a bond, note or loan.

Interest rate floors are commonly used in the financial industry to protect against falling interest rates. In this scenario, the holder of an instrument with an interest rate floor is guaranteed that the interest rate will not fall below the floor, even if market rates decrease. This provides a form of downside protection for investors or borrowers, which can help them manage risk.

Interest rate floors are often used in combination with other financial products, such as interest rate swaps or caps. For example, an investor might buy an interest rate swap that pays them a fixed rate above the prevailing interest rate in exchange for paying a floating rate. If interest rates fall, the investor may also have an interest rate floor in place, ensuring that they still receive the minimum interest rate specified in the floor contract.

Interest rate floors are an important tool for managing interest rate risk in a variety of financial markets, including mortgages, corporate bonds, and municipal bonds. By providing a minimum interest rate, they help investors and borrowers manage their exposure to interest rate fluctuations, ensuring that they receive a predictable stream of income or pay a predictable amount of interest.


More Glossary Terms Beginning with I
  • I-joist
    An "I"-shaped engineered wood structural product designed for use in residential and light commercial floor and roof construction. The product is prefabricated using sawn lumber flanges and wood panel webs, bonded together with exterior grade adhesives. Forestry & Wood Products Industry Operating Statistics
    Manufacturing Term Letter: I
  • Illiquid Securities
    are securities that cannot easily be sold within seven days by virtue of the absence of a readily available market or legal or contractual restriction on resale. Certain restricted securities (such as Rule 144A securities) are not generally considered illiquid because of their established trading market.
    Financial Term Letter: I
  • Immunocytochemistry
    A method of detecting cancer in tissues. Monoclonal antibodies are used to stain the tissues and cells before examination under a microscope.
    Health Care Term Letter: I
  • Immunogenic
    Compounds that show toxicity levels equally at given doses.
    Health Care Term Letter: I
  • Immunoglobulin IgG
    IgG or Immunoglobulin are proteins found in human blood. This protein is called an "antibody" and is an important part of the bodys defense against disease. When the body is attacked by harmful bacteria or viruses, antibodies help fight these invaders.
    Health Care Term Letter: I
  • Imports
    merchandise of foreign origin or domestically produced goods that are returned to the United States with no change in condition or after having been processed and/or assembled in other countries.
    Economy Term Letter: I
  • In-license
    Acquiring the rights to a technology and the related know-how from an unrelated company or institution in order to further develop, commercialize or otherwise exploit the technology
    Economy Term Letter: I
  • In-vitro
    refers to the technique of performing a given experiment in a test tube, or, generally, in a controlled environment outside a living organism.
    Health Care Term Letter: I
  • In-vivo
    refers that which takes place inside an organism. In science, in vivo refers to experimentation done in or on the living tissue of a whole, living organism as opposed to a partial or dead one. Animal testing and clinical trials are forms of in-vivo research.
    Health Care Term Letter: I
  • Income Per Employee
    A ratio that measures companys productivity by dividing Income earned over the past twelve months, by the number of employees. Income Per Employee displays how much a single employee contributes to the net income of the company in the period of 12 months. Income Per Employee Formula = (Net Income / Employee)
    Fundamental Analysis Letter: I
  • Income Statement
    A financial statement that reflects the companys profit by measuring revenues and expenses. Statement of Income
    Financial Term Letter: I
  • Income Tax
    means any tax on or measured by the net income of a Party (including taxes on capital or net worth that are imposed as an alternative to a tax based on net or gross income), or tax which is in the nature of an excess profits tax, minimum tax on tax preferences, alternative minimum tax, accumulated earnings tax, personal holding company tax, capital gains tax or franchise tax for the privilege of d
    Financial Term Letter: I