Interest Rate Collar
Definition - What does Interest Rate Collar mean?
Insuranceopedia explains Interest Rate Collar
This plan gets its name because it is analogous to the physical device worn around the neck to protect that part of the body. Like a physical collar, the financial collar protects the well-being of an investor from a decrease in interest by giving them the option of selling their shares when those assets sell at a specific price, especially at a point that it might suddenly drop owing to fluctuations in the market.
While the collar gives a certain amount of protection, it does come with a disadvantage. Namely, if the price of the share goes up past the specified ceiling, it might have been already bought below that price.
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