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Derivatives




Amortizing Floor


An interest rate floor in which the successive floorlets cover decreasing notional principal amounts. In other words, the notional principal amount declines over time as the principal is repaid (or amortized). The amortizing floor, like the amortizing swap, is primarily used to hedge loans the principal of which declines on a scheduled basis. It is also instrumental to hedge investments that pay out principal over time.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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