It is similar to caps except that where caps protect against upward moves in the interest rate floors protect against downward moves. Like caps, they can be purchased from a bank and an amount to a contract whereby the seller agrees to reimburse the buyer from a chosen reference rate fall below the floor’s interest rate level. To compensate the seller for taking on the interest rate risk, the buyer makes a premium payment. The floor stipulates the maturity, the interest rate level, the reference floating rate, the reset period and the notional principal amount.