Cap: Difference between revisions
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#An option which effectively establishes a maximum worst case hedged rate or price for a cash outflow or a liability, while allowing the holder of the cap to retain the potential benefit of more favourable lower market rates or prices. In the case of a commodity, the cap would be a call option over the commodity. | |||
#The hedged expense profile achieved by the combination of a cap option with the underlying exposure. | |||
An option which effectively establishes a maximum worst case hedged rate or price for a cash outflow or a liability, while allowing the holder of the cap to retain the potential benefit of more favourable lower market rates or prices. | #A risk management arrangement whereby limits are placed on the positions that participants in an interbank funds transfer system can incur during the business day. | ||
In the case of a commodity, the cap would be a call option over the commodity. | |||
The hedged expense profile achieved by the combination of a cap option with the underlying exposure. | |||
A risk management arrangement whereby limits are placed on the positions that participants in an interbank funds transfer system can incur during the business day | |||
== See also == | == See also == | ||
* [[ | * [[Call]] | ||
* [[Capped FRN]] | * [[Capped FRN]] | ||
* [[Caps]] | |||
* [[Collar hedge]] | * [[Collar hedge]] | ||
* [[Floor]] | * [[Floor]] | ||
* [[Interest rate cap]] | * [[Interest rate cap]] | ||
* [[Interest rate collar]] | * [[Interest rate collar]] | ||
* [[Maximum acceptance cap]] | |||
* [[Notional amount]] | * [[Notional amount]] | ||
* [[ | * [[Option]] | ||
[[Category:Financial_products_and_markets]] | |||
Latest revision as of 08:06, 27 March 2024
- An option which effectively establishes a maximum worst case hedged rate or price for a cash outflow or a liability, while allowing the holder of the cap to retain the potential benefit of more favourable lower market rates or prices. In the case of a commodity, the cap would be a call option over the commodity.
- The hedged expense profile achieved by the combination of a cap option with the underlying exposure.
- A risk management arrangement whereby limits are placed on the positions that participants in an interbank funds transfer system can incur during the business day.
