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.


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.

  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 ...
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