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Derivatives

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  • July 28, 2021
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Sticky Floor

A nonstandard interest rate floor in which the floor rate for each floorlet is equal to the sum of the previous floor rate and a specified spread. For example, let the previous floor rate and the LIBOR rate be 5.5% and 5% respectively, then the floor rate for the sticky floor is the maximum of 5.5% and 5% plus a set spread of 1%. This is equal to 5.5%+ 1%= 6.5%. Each payment in a sticky floor, like a sticky cap, depends on all the previous payments, and then it is path-dependent.


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