Collar (interest rate derivative) - Financial definition
Financial acronyms
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Concise definition of the term collar
Over-the-counter interest rate derivative which protects its holder against interest rate movements outside of a certain range. The purchase of a collar consists of simultaneously buying an interest rate cap and selling an interest rate floor. The sale of a collar is realized by simultaneously selling the cap and buying the floor.
Comprehensive definition of the term collar
Collars can be used to keep the cost of floating-rate debt within a certain range despite important interest rate movements.