There are agreements between two parties whereby one party for an upfront premium agrees to compensate the other at specific time periods if the reference rate is different from a predetermined level. If one party agrees to pay the other when the reference rate exceeds a predetermined level, the agreement is referred to as an interest rate cap or ceiling. The agreement is referred to as an interest rate floor if one party agrees to pay the other when the reference rate falls below a predetermined level. The predetermined level is called the strike rate. The strike rate for a cap is called the cap rate; the strike rate for a floor is called the floor rate.