Difference between revisions of "Cap"

From ACT Wiki
Jump to: navigation, search
(Link with Caps page and reduce detail on matter covered in other page.)
(Capitalise link.)
 
Line 5: Line 5:
  
 
== 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