A barrier floor whereby protection (floor rate mechanism) ceases to exist or deactivates (i.e., knocks out) only if the floating interest rate crosses the barrier. Here it is said that the floor knocks out and no longer holds.

Such a knock-out (KO) mechanism is usually added to a floor in order to allow the protection provider to walk away from the agreement anytime the market rate drops below a given barrier, therefore protection payout can be contained taking into consideration the possibility of extreme market conditions.