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elearning > Caps and floors

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Learn about the following:

How caps work. How floors work. How caps and floors can be used. How collars work.

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Course Summary

Caps & floors menuCap pricesCap payoff

Cap paymentsFloor payoffCollars

  • 20 minutes
  • 8 question multiple choice
  • How caps work
  • How floors work
  • How caps & floors can be used
  • How collars work

Caps & Floors - the details

1. Interest rate caps

  • How they work
  • Price quote
  • Premium, how much and who pays
  • The risk for buyer and seller
  • Potential payments for different Libor rates
  • Hedging use

2. Interest rate floors

  • How they work
  • Price quote
  • Premium, how much and who pays
  • The risk for buyer and seller
  • Potential payments for different Libor rates
  • Hedging use

3. Interest rate collars

  • Buying a cap and selling a floor
  • Net affect, maximum and minimum borrowing cost
  • Premium payments
  • Zero cost structures
  • Why customers use them & how dealers make money

4. Summary 

5. Test