What does Floortion mean?
An option that gives the holder the right to buy or sell an interest rate floor at a certain price during a predetermined period of time. Like other options, in floortion the option holder gets rights but he is under no obligation to exercise it.
Futures Knowledge Explains Floortion
Flooration has the advantages of both an interest rate floor and option. While the interest rate floor safeguards the floor buyer from losses as an outcome from a decline in interest rates, the floor buyer can avoid to exercise the option if the interest rate does not decline below a certain level and the payoff is not positive.