Join Mailing List

For latest news and information about Treasury and Financial Markets, enter your details below:

elearning > Caps and floors

Print Preview Send to a Friend Share

Learn about the following:

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

Register for free or login to view the full publication

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

Related Documents

Registration RequiredOption Basics 100% relevant


Free to ViewDerivatives Training 45% relevant


Registration RequiredRegulation > Consultation Paper 08/24 Stress and scenario testing December 2008 22% relevant

12th April 2009

The FSA wants to see more stress and scenario testing in firms. Senior management should be involved. Previous assumptions have been too relaxed. Stress testing should be in detail with the mitigating actions rehearsed. Reverse stress testing is introduced as a method of identifying critical events. The FSA is not going to tell you how to do this, it's up to you. However firms can expect greater challenge on the assumptions made.


Registration RequiredRegulation > Policy statement 09/20 Stress testing and scenario testing December 2009 22% relevant

18th December 2009

What's stress testing about? The regulator is imposing a stress testing regime on firms because the risk management techniques employed before the crisis did not accurately reflect what could happen. In particular risk models allowed firms (and regulators) to ignore tail-risks. As a result many firms have found themselves badly exposed in the crisis. In order to mitigate against this happening again the FSA is making stress testing and reverse stress testing mandatory. Let's answer a few questions.


Registration RequiredOTC and exchange traded 22% relevant

25th March 2017

Some derivatives like interest rate and currency swaps are traded directly between two parties. When they deal, they agree the amount, price, settlement date and maturity date of the transaction. Traditionally the details of these transactions are only known by the parties involved (but now regulatory reporting applies).


Free to ViewShort courses>Repo, central banks and monetary policy 22% relevant