Floor
A floor is a derivative feature that sets a minimum level for a payment or rate in a floating-rate arrangement. It is often used with a cap in cap-and-floor structures to limit downside and upside in cash flows.
Example: Example: A $1 million notional floating-rate note carries a floor of 0.50%. If the reference rate for a period is 0.30%, the floor payoff is 0.20% of notional, providing a minimum level of income for that period.
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