## Floor

Subtype of CapFloor TypeCorresponds to the usual "Floor", i.e. a series of cash flows, where the effective rate

**determining each cash flow amount is defined as**

*R***, where**

*R = max(K-I,0)***is the agreed reference index - typically Libor - and**

*I***some constant referred to as**

*K***.**

*strike*For example, a Libor-based Floor consisting of 3 cash flow periods with strike = 4% and Libor rate at each period being 3%, 4% and 5% respectively, would pay its holder amounts based on the effective rates 1%, 0% and 0% respectively.

This is equivalent to holding a series of put options on the underlying reference index.