Web www.software-risk.co.uk

An upper limit on the interest rate on a floating-rate note (FRN) or an adjustable-rate mortgage (ARM). Also, an OTC derivatives contract consisting of a series of European interest rate call options; used to protect an issuer of floating-rate debt from interest rate increases. Each individual call option within the cap is called a caplet. Opposite of a floor.

Copyright © 2005, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

Related Articles
Bank Of England Cuts Interest Rates to 4.5%
Uniform practice code
Swaption
OTC
Notional principal amount
Not a name with us
Interest rate
Floating-rate preferred

Similar Areas

Finance Items

Selected Books

Keywords

Cap

upper limit

interest rate

floating-rate

floating-rate note

FRN

adjustable-rate

adjustable-rate mortgage

OTC

derivatives

OTC derivatives