Knowledge

Q-Floor

A floor that provides insurance against the total interest income over a period and is an ideal alternative for investors with floating rate assets. The investor pays a premium and in return receives a guaranteed maximum cash interest income for the period. Over this period the underlying asset remains floating. The investor is guaranteed to earn a minimum cash income from the asset and any shortfall is reimbursed by the option seller. Q floors are also known as quantity floors, cumulative floors and payment floors