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Floorlet
An interest rate put option that sets a lower limit on the interest rate in a multiple period floor agreement for a specified reference period.
(1) By paying a premium to the writer, the floorlet holder has the right to receive, and the writer is required to pay, at the end of the reference period, an interest differential between a floating rate index such as LIBOR, and the floor strike rate, if this rate is higher.
(2) A floor consists of a series of floorlets, each of which sets a lower limit on the interest rate for one of the reference periods over the term of the floor.