1. A provision of an adjustable rate mortgage limiting how much interest rates may increase in a single adjustment period.
2. An options contract which puts an upper limit on a floating exchange rate. The writer of the cap has to pay the holder of the cap the difference between the floating rate and the reference rate when that reference rate is breached. There is a premium to be paid by the buyer of such a contract in order to gain the certainty of a maximum payout.
Related information about interest rate cap:
- Interest rate cap and floor - Wikipedia, the free encyclopedia
An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price.
- Interest Rate Cap Structure Definition | Investopedia
Limits to the interest rate on an adjustable-rate loan - frequently associated with a mortgage. There are several different types of interest rate cap structures ...
- Interest Rate Cap
An interest-rate cap is an OTC derivative that protects the holder from rises in short-term interest rates by making a payment to the holder when an underlying ...
- Interest Rate Cap - Financial Dictionary - The Free Dictionary
An interest rate agreement in which payments are made when the reference rate exceeds the strike rate. Also called an interest rate ceiling. Related: Interest rate ...
- What is interest rate cap? definition and meaning - InvestorWords.com
Definition of interest rate cap: A provision of an adjustable rate mortgage limiting how much interest rates may increase in a single adjustment period.
- Interest-Rate Caps - fxcenterUSA
The chart on this page shows the effect of a 6% 3-year Interest-Rate Cap. ... hand , if the interest rates on any reset date are higher than the Interest-Rate Cap, ...
- Adjustable-Rate Mortgage (ARM) Interest-Rate Caps, Periodic Caps ...
Let us suppose you have an ARM with a periodic interest-rate cap of 2%. At the first adjustment, the index rate goes up 3%. The example shows what happens.
- What is interest rate cap? - BusinessDictionary.com
Definition of interest rate cap: This is a provision in adjustable rate mortgages that limits how much an interest rate can increase. There are periodic interest rate ...