Definition of Float

Float

The number of shares that are actively tradable in the market, excluding shares that are held by officers
and major stakeholders that have agreements not to sell until someone else is offered the stock.

Availability float

Checks deposited by a company that have not yet been cleared.

Bank collection float

The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.

Collection float

The negative float that is created between the time when you deposit a check in your account
and the time when funds are made available.

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Dirty float

A system of floating exchange rates in which the government occasionally intervenes to change
the direction of the value of the country's currency.

Disbursement float

A decrease in book cash but no immediate change in bank cash, generated by checks
written by the firm.

Floater

floating rate bond.

Floating exchange rate

A country's decision to allow its currency value to freely change. The currency is not
constrained by central bank intervention and does not have to maintain its relationship with another currency
in a narrow band. The currency value is determined by trading in the foreign exchange market.

Floating lien

General lien against a company's assets or against a particular class of assets.

Floating supply

The amount of securities believed to be available for immediate purchase, that is, in the
hands of dealers and investors wanting to sell.

Floating-rate contract

A guaranteed investment contract where the credit rating is tied to some variable
("floating") interest rate benchmark, such as a specific-maturity Treasury yield.

Floating-rate note (FRN)

Note whose interest payment varies with short-term interest rates.

Floating-rate payer

In an interest rate swap, the counterparty who pays a rate based on a reference rate,
usually in exchange for a fixed-rate payment

Floating-rate preferred

Preferred stock paying dividends that vary with short-term interest rates.

Free float

An exchange rate system characterized by the absence of government intervention. Also known as
clean float.

Inverse floating rate note

A variable rate security whose coupon rate increases as a benchmark interest rate declines.

In-house processing float

Refers to the time it takes the receiver of a check to process the payment and
deposit it in a bank for collection.

Mail float

Refers to the part of the collection and disbursement process where checks are trapped in the postal system.

Managed float

Also known as "dirty" float, this is a system of floating exchange rates with central bank
intervention to reduce currency fluctuations.

Net float

Sum of disbursement float and collection float.

Payment float

Company-written checks that have not yet cleared.

Positive float

See:float.

availability float

Checks already deposited that have not yet been cleared.

floating-rate security

Security paying dividends or interest that vary with short-term interest rates.

net float

Difference between payment float and availability float.

payment float

Checks written by a company that have not yet cleared.

Clean Float

A flexible exchange rate system in which the government does not intervene.

Dirty Float

A flexible exchange rate system in which the government intervenes.

Floating Exchange Rate

See flexible exchange rate.

Floating Charge

Charge or assignment on a company's total assets as security for a loan on total assets without specifying specific assets.

Floating Interest Rate

A rate that fluctuates with general market condition.

Auction rate preferred stock (ARPS)

floating rate preferred stock, the dividend on which is adjusted every
seven weeks through a Dutch auction.

Automated Clearing House (ACH)

A collection of 32 regional electronic interbank networks used to
process transactions electronically with a guaranteed one-day bank collection float.

Call swaption

A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
writer therefore becomes the fixed-rate receiver/floating rate payer.

Cap

An upper limit on the interest rate on a floating-rate note.

Circus swap

A fixed rate currency swap against floating U.S. dollar LIBOR payments.

Collar

An upper and lower limit on the interest rate on a floating-rate note.

Dividend rate

The fixed or floating rate paid on preferred stock based on par value.

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.

Equity swap

A swap in which the cash flows that are exchanged are based on the total return on some stock
market index and an interest rate (either a fixed rate or a floating rate). Related: interest rate swap.

Fixed-rate payer

In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a
floating-rate payment.

Foreign bond market

That portion of the domestic bond market that represents issues floated by foreign
companies to governments.

Foreign equity market

That portion of the domestic equity market that represents issues floated by foreign companies.

Mismatch bond

floating rate note whose interest rate is reset at more frequent intervals than the rollover
period (e.g. a note whose payments are set quarterly on the basis of the one-year interest rate).

Put provision

Gives the holder of a floating-rate bond the right to redeem his note at par on the coupon
payment date.

Put swaption

A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate
payer. The writer of the swaption therefore becomes the floating-rate receiver/fixed-rate payer.

Remote disbursement

Technique that involves writing checks drawn on banks in remote locations so as to
increase disbursement float.

Reset frequency

The frequency with which the floating rate changes.

Swap

An arrangement whereby two companies lend to each other on different terms, e.g. in different
currencies, and/or at different interest rates, fixed or floating.

Term loan

A bank loan, typically with a floating interest rate, for a specified amount that matures in between
one and ten years and requires a specified repayment schedule.

Variable rated demand bond (VRDB)

floating rate bond that can be sold back periodically to the issuer.

Preferred Stock

A type of equity security where holders have a claim on the assets
and earnings of a company after the debt providers but before the
holders of common stock. Preferred stock generally pays a fixed
or floating rate dividend each year.

Swap

An exchange of cash flows between two counterparties. The
counterparties may exchange flows in different currencies
(currency swap) or exchange floating interest rate payments for
fixed rate payments (interest rate swap).

Cap

Interest-rate option that guarantees that the rate on a floating-rate loan
will not exceed a certain level.

Collar

Interest-rate option that guarantees that the rate on a floating-rate
loan will not exceed a certain upper level nor fall below a lower level. It is
designed to protect an investor against wide fluctuations in interest rates.

Floor

Interest-rate option that guarantees that the rate on a floating-rate
loan will not fall below a certain level.
Forward curve
The curve of forward interest rates vs. maturity dates for bonds.

Convertible Debenture

Are debt instruments that are convertible into common or preferred shares, take secondary or no security against assets, have flexible terms of repayment and charge fixed or floating interest rates.

Preferred Shares

Are equity instruments that take no security against assets, have flexible terms of repayment and pay fixed or floating dividends.

Present Value (PV)

Are equity instruments that take no security against assets, have flexible terms of repayment and pay fixed or floating dividends.

Senior Debt

Are debt instruments that provide financing, take primary security against either specific or all assets of the borrower, have fixed terms of repayment and charge fixed or floating interest rates.

Subordinated Debt

Debt instruments that provide financing for acquisitions, expansion and restructuring, take secondary security against assets, have fixed or flexible terms of repayment and charge fixed or floating interest rates.

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