An interest rate floor that has a forward start date. In other words, the floor comes into effect at some future time, though it is currently held by the buyer (holder). This floor is usually used to hedge against interest rate downward fluctuations over the period from the floor’s effective date (start date) to floor’s expiration date. The floor agreement specifies the floor fixed rate at which the counterparties agree to start exchanging payments from the effective date (start date) onwards. This rate is known as the forward floor fixed rate.
A forward floor is a strip of floorlets each of which constitutes a put option on a forward rate (forward floorlets).
Forward floors are also referred to as deferred start floors, forward start floors, and delayed start floors.
