What Is A Floating Interest Rate?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

A floating interest rate is one that is not fixed, but rather is free to float around with whatever the prevailing interest rate is at the time. When two parties agree a loan at a fixed interest rate each one is taking on some interest rate risk. The lender is assuming that interest rates will rise in the future whilst the borrower is expecting interest rates to fall.

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Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.