Interest rate cap

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Revision as of 08:55, 1 August 2015 by imported>Doug Williamson (Align with qualifications material.)
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1.

An option which pays out to the holder if the reference interest rate rises above the strike rate on the maturity date, or on a series of pre-agreed dates. The effect of hedging interest expense with a cap is to establish a maximum level for the hedged interest expense achieved.


2.

The hedged interest expense profile achieved by the use of an option in combination with an underlying interest expense exposure.


See also