Difference between revisions of "Cap"

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== See also ==
== See also ==
* [[call]]
* [[Call]]
* [[Capped FRN]]
* [[Capped FRN]]
* [[Caps]]
* [[Caps]]

Latest revision as of 22:28, 28 April 2016

  1. 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.
  2. The hedged expense profile achieved by the combination of a cap option with the underlying exposure.
  3. 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