Drop Lock

DEFINITION of 'Drop Lock'

An arrangement whereby the interest rate on a floating rate note or preferred stock becomes fixed if it falls to a specified level.

BREAKING DOWN 'Drop Lock'

If a country had a floating exchange rate and a currency that suddenly dropped, the drop lock would fix the exchange rate once it hit a certain level.

RELATED TERMS
  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  3. Floating-Rate Note - FRN

    A note with a variable interest rate. The interest rate is usually ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Dumbbell

    A method of investing in bonds so that the majority of an investor's ...
  6. Dry Powder

    A slang term referring to marketable securities that are highly ...
Related Articles
  1. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  2. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  3. Options & Futures

    Dividends, Interest Rates And Their Effect On Stock Options

    Learn how analyzing these variables are crucial to knowing when to exercise early.
  4. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  5. Investing Basics

    The Different Between Preferred and Common Stock

    Preferred and common stocks are different in two key ways.
  6. Stock Analysis

    Analyzing GE's Preferred Stock (GE)

    Learn why General Electric Company's new Series D Perpetual Preferred stock is an excellent choice for investors desiring a safe and steady income stream.
  7. Forex Education

    Interest Rate and Currency Value And Exchange Rate

    In general, higher interest rates in one country tend to increase the value of its currency.
  8. Stock Analysis

    Google Stock: A Tale of Two Share Classes (GOOG, GOOGL)

    Google stock comes in two different flavors with different rights for shareholders.
  9. Markets

    What Happens in a Currency Crisis?

    A currency crisis comes from a decline in the value of a country’s currency.
  10. Forex Education

    Why Is the Chinese Yuan Pegged?

    Explore China's currency peg, which has helped Asia's largest economy enjoy robust growth and continued prosperity by making the nation's exports cheaper.
RELATED FAQS
  1. What are ComputerShare's escheatment services?

    Understand the process of escheatment and how it can affect shareholders. Learn about the ways that ComputerShare protects ... Read Answer >>
  2. What types of capital are not considered share capital?

    Find out what types of capital are not considered share capital, including an explanation of the different types of share ... Read Answer >>
  3. What is the difference between issued share capital and subscribed share capital?

    Find out about the difference between subscribed share capital and issued share capital, including an explanation of the ... Read Answer >>
  4. How many votes am I entitled to, if I own ordinary shares of a company?

    Understand what an ordinary share is and how it may benefit investors. Learn how many votes an investor is entitled to, if ... Read Answer >>
  5. What is the difference between the equity market and the stock market?

    Discover the basic information about the equity, or stock, market and the two primary classifications of equities that are ... Read Answer >>
  6. How much, if any, influence do non-controlling interest shareholders have?

    Examine some of the different ways non-controlling interest shareholders can exercise influence over both public and private ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center