floor

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Floor

The area of a stock exchange where active trading occurs. Also the price at which a stop order is activated (when the price drops low enough to activate such an order). In context of interest rates, a level which an interest rate or currency is structured not to go below. In context of OTC interest rate options, a series of interest rate put options, where the buyer of the floor guarantees a minimum interest income

Floor

1. See: Exchange floor.

2. The lowest price or some other limit that can occur. For example, in an adjustable-rate mortgage, the lender will often specify a floor for the interest rate, which means that even though the interest rate on the mortgage changes from time to time, it will never drop below the specified floor. These exist to protect one or both parties to a contract or investment. See also: Ceiling, Collar.

floor

The area of an organized exchange where securities are traded. Customer orders are transferred to the floor, where they are executed by members of the exchange.

floor

Other than the obvious, refers to the bottom of something. Variable-rate mortgages may provide a minimum interest rate,called a floor,even if the rate would otherwise be less if the index dropped. Percentage leases with rent partially based on gross revenues might have a minimal amount,or floor payment.