capfloor
A cap and a floor are types of interest rate derivatives that provide protection against movements in a reference rate, typically the short-term rate on a floating-rate loan. A cap pays when the reference rate exceeds a specified cap rate, while a floor pays when the rate falls below a specified floor rate. Both are usually structured as a series of options across the reset dates of the loan.
A cap floor, sometimes written cap/floor, is an instrument that combines these features to bound payments within
Pricing and valuation: The value of a cap floor equals the sum of the values of its
Use and applications: Cap floors are used by borrowers seeking protection against adverse moves in rates while