Definition of Free float

Free float

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

Arbitrage-free option-pricing models

Yield curve option-pricing models.

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.

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.

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 cash flows

Cash not required for operations or for reinvestment. Often defined as earnings before
interest (often obtained from operating income line on the income statement) less capital expenditures less the
change in working capital.

Free on board

Implies that distributive services like transport and handling performed on goods up to the
customs frontier of the economy from which the goods are classed as merchandise.

Free reserves

Excess reserves minus member bank borrowings at the Fed.

Free rider

A follower who avoids the cost and expense of finding the best course of action and by simply
mimicking the behavior of a leader who made these investments.

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.

Riskless or risk-free asset

An asset whose future return is known today with certainty. The risk free asset is
commonly defined as short-term obligations of the U.S. government.

Risk-free asset

An asset whose future return is known today with certainty.

Risk-free rate

The rate earned on a riskless asset.

Tax free acquisition

A merger or consolidation in which 1) the acquirer's tax basis in each asset whose
ownership is transferred in the transaction is generally the same as the acquiree's, and 2) each seller who
receives only stock does not have to pay any tax on the gain he realizes until the shares are sold.

free cash flow

Generally speaking, this term refers to cash flow from
profit (cash flow from operating activities, to use the more formal term).
The underlying idea is that a business is free to do what it wants with its
cash flow from profit. However, a business usually has many ongoing
commitments and demands on this cash flow, so it may not actually be
free to decide what do with this source of cash. Warning: This term is
not officially defined anywhere and different persons use the term to
mean different things. Pay particular attention to how an author or
speaker is using the term.

Free Cash Flow

The funds available for distribution to the capital providers of the
company after investments inside the company have been made

Risk-free Rate

The rate of return on an investment with known future benefits; a
riskless rate of return, often estimated using the return earned on
short-term U.S. Treasury securities

North American Free Trade Agreement (NAFTA)

an agreement among Canada, Mexico, and the United States establishing the North American free Trade Zone, with a resulting reduction in trade barriers

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.

Free Trade

The absence of any government restrictions, such as tariffs or quotas, on imports or exports.

Free-on-Board (FOB) Destination

A shipping arrangement agreed to between buyer and
seller where title to the goods sold passes when the goods in question reach their destination.
When goods are shipped FOB destination, revenue is properly recognized when the goods reach
their destination.

Free-on-Board (FOB) Shipping Point

A shipping arrangement agreed to between buyer and
seller where title to the goods sold passes when the goods in question are delivered to a common
carrier. When goods are shipped FOB shipping point, revenue is properly recognized when the
goods are delivered to the common carrier.

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.

Risk-Free Rate

The rate of return obtainable on government of Canada treasury bills.

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