A floating price is a pricing mechanism where the final price is determined by market conditions at the time of transaction or during a specified pricing period. Unlike fixed prices, floating prices adjust with market movements, allowing parties to benefit from favorable changes while accepting exposure to adverse price movements. This pricing method is common in commodity markets and financial instruments.

Floating price contracts often reference benchmark prices, indices, or market assessments during predetermined pricing windows. This approach provides market exposure while potentially offering better average pricing than fixed alternatives. However, floating prices create budgeting uncertainty and require active risk management to handle potential adverse price movements.

Real-world example: A power utility purchases natural gas using floating prices based on monthly Henry Hub averages, benefiting when gas prices decline but facing higher costs during price spikes, requiring careful risk management.