Published September 8, 2020
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A Description of Interest Rate Caps and Floors Valuation
Description
An interest rate cap is an OTC derivative where the buyer receives payments at the end of each period when the interest rate exceeds the strike, whereas an interest rate floor is a similar contract where the buyer receives payments at the end of each period when the interest rate is below the strike. Caps and floors are widely used to hedge against interest rate fluctuations.
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https://ia801404.us.archive.org/13/items/ir-cap-30/IrCap-30.pdf
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IrCap-30.pdf
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