An interest rate derivative (specifically, an interest rate option) which allows the holder to receive an interest rate payment during a specific period of time if interest rates fall below a pre-defined level. In this sense, a floorlet guarantees a minimum level of floating interest rate for one particular date. In other words, an interest rate floorlet is a single put option on interest rates. In return for the right to exercise such an option, the holder pays a premium.
An interest rate floor is a sum of continuous series of interest rate floorlets.
