DEFINITION of 'Floating Price'
The leg of a swap that is based on a fluctuating interest rate. In a plain vanilla interest rate swap, there are two streams of cash flows. Each stream is based on the same amount of notional principal, but one stream pays interest on that notional principal at a fixed rate (or fixed price) and one stream pays interest on the notional principal at a floating rate (or floating price).
BREAKING DOWN 'Floating Price'
While the fixedrate stream does not change for the duration of the swap, the floating rate stream changes periodically. The floating rate will adjust as its benchmark interest rate, changes in accordance with market conditions. The benchmark is often LIBOR, but may also be the yield on oneyear U.S. Treasuries or another interest rate. Two parties, called counterparties, enter into fixedforfloating swap transactions to reduce their exposure to changes in interest rates or to attempt to profit from changes in interest rates.

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What does the notional principal of a derivative contract refer to?
Find out more about the notional principal amount, interest rate swap agreements and how the notional principal amount in ... Read Answer >> 
What are interest rate swaps on the OTC market?
Learn about interest rate swaps and how they are traded over the counter, and understand the impact of DoddFrank on swaps ... Read Answer >> 
How do companies benefit from interest rate and currency swaps?
An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Answer >> 
Can individual investors profit from interest rate swaps?
Find out how individual investors can speculate on interest rate movements through interest rate swaps by trading fixed rate ... Read Answer >> 
Do interest rate swaps trade on the open market?
Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >> 
What is an absolute rate?
An absolute rate is easy to understand once you know the basics of an interest rate swap. An absolute rate is the fixed rate ... Read Answer >>