Floating Leg
In a derivative such as an interest-rate swap, the floating leg is the portion of the contract whose payments reset at specified intervals based on a reference interest rate and thus vary with market rates. The other leg is the fixed leg, which pays a predetermined rate on the notional amount.
Example: In a $100 million interest-rate swap, the floating leg references SOFR and a 0.15% spread; at the first payment date, the floating-rate amount is calculated as the observed SOFR for the prior period plus the spread, and that amount is netted against the fixed-leg payment.
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