The interest rate floor is one of three contracts derived from common interest rates, the other two being interest rate caps and interest rate swaps. Interest rate flooring and interest rate cap contracts are derivatives that are generally purchased on exchanges similar to selling and calling options. In the case of interest rate swaps, two separate entities must agree on the exchange of an asset that generally involves the exchange of fixed-rate debt against interest owed. Interest rate and interest rate contracts may offer another alternative to the exchange of balance sheet assets in an interest rate swap. These option products can be used to set maximum (capped) or minimum (ground) rates or a combination of the two, called cervical structure. These products are used in the same way by investors and borrowers to protect against unfavourable interest rate movements. Interest documents and interest rate caps are levels used by different market players to cover risks associated with credit variable credit products. For both products, the contract buyer requires payment on the basis of a negotiated rate. In the case of an interest rate floor, the purchaser of an interest floor contract seeks compensation if the variable rate falls below the contract floor. The lowest possible interest rate under an ARM contract.

The interest rate cap indicates the interest rate ceiling that can be charged on the nominal amount of the outstanding. As a result, the interest rate floor indicates the minimum interest rate that can be charged. The floor and ceiling are a corridor for possible interest rates and are used to protect against interest rate fluctuations. As a general rule, they are the subject of a contractual agreement between the creditor and the debtor. Similarly, an interest rate floor is a derivative contract by which the buyer receives payments at the end of each period during which the interest rate is below the agreed exercise price. With the possibility of negative interest rates, the introduction of interest underseeds by credit banks has guaranteed a return on their loans. For example, if LIBOR rates fall below zero, the 0% limit prevents the bank from paying negative interest to the borrower for its loan. Could you clarify whether to give interest rates capped at interest rates and interest rates? What is striking here is that a fundamental change in the calculation of interest rates – a direct contractual manipulation of the current policy rate – has hardly been questioned and has hardly been the subject of market discussion.