An equity swap whose equity side is bounded by a floor. The floor places a lower limit on the equity income on an equity-referenced asset. It pays the holder when the reference rate moves down blow a specified floor rate.

The floor can be purchased along with the equity swap in one package from an equity swap dealer or separately each from a different dealer. For example, suppose a company which receives an equity index performance and pays a fixed rate on a three-year, annual-payment equity swap. The company buys a floor on the equity leg that binds the floating rate income to an lower limit of 10%. In periods where the equity total return drops below 10%, the company receives any shortfall.