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Topic: Interest rate cap

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Interest rate floor

Exotic interest rate option

Interest Rate Swap

Foreign exchange option

Interest

Swap (finance)

Forward starting swap

Implied volatility

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	Interest rate cap and floor - Wikipedia, the free encyclopedia
		An interest rate cap is a derivative in which the buyer received money at the end of each period in which an interest rate exceeded the agreed strike price.
		The interest rate cap can be analyzed as a series of European call options or caplets which exists for each period the cap agreement is in existence.
		The simplest and most common valuation of interest rate caplets is via the Black model.
	en.wikipedia.org /wiki/Interest_rate_cap (457 words)

	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 (the "index" or "reference" interest rate) exceeds a specified strike rate (the "cap rate").
		Caps are purchased for a premium and typically have expirations between 1 and 7 years.
		Caps are frequently purchased by issuers of floating rate debt who wish to protect themselves from the increased financing costs that would result from a rise in interest rates.
	www.riskglossary.com /articles/cap.htm (526 words)

	Interest Rate Cap
		Caps generally guarantee a maximum level of either 3 or 6 month Libor or whatever the prevailing floating rate index is in the particular market.
		The credit rating of the institution at this stage is unlikely to permit access to the IRS market so the purchase of 2y or 3year caps would hedge the interest rate risk during the period of reorganisation following the LBO.
		The relevant Implied Forward is the Swap rate for the period of the Cap or the FRA rate for a Caplet.
	ciberconta.unizar.es /bolsa/cap.htm (2008 words)

	Washington Mutual 1998 Annual Report
		The effect that interest rate exchange agreements and interest rate cap agreements would have had on the repricing period of deposits and borrowings in an increasing interest rate environment (up 200 basis points) for the period the derivatives were outstanding was as follows:
		The effect that interest rate exchange agreements and interest rate cap agreements would have had on the repricing period of deposits and borrowings in a decreasing interest rate environment (down 200 basis points) for the period the derivatives were outstanding was as follows:
		The effect of such agreements in a rising interest rate environment is to shorten the effective repricing period of the underlying assets.
	www.wamu.com /about/investorrelations/data/1998/m_10k2q.html (981 words)

	Citibank CitiAssist Loan (Site not responding. Last check: 2007-09-17)
		Interest Rate: The interest rate is variable based on the prime rate and it is adjusted quarterly.
		Principal and interest are deferred while the student is enrolled and during the six month grace period.
		Interest is capitalized once at the time the loan enters repayment.
	www.bu.edu /finaid/loans/credit/credit_citiassist.shtml (191 words)

	[No title]
		An interest rate cap is used to hedge loan payments and allows the user to set the maximum interest that is going to be paid out.
		Interest rate floors are used to protect returns on investment portfolios and allow the user to determine the lowest rate the rate of return on a portfolio can fall to.
		A B Difference Fixed Rate 10% 9% 1% Floating rate LIBOR +2 LIBOR 2% Notice that A is riskier and is thus charged higher interest rate in both markets.
	www.courses.psu.edu /fin/fin406_rxs71/IRR.doc (625 words)

	Interest-Rate Caps
		On those occasions the firm thought that interest rates were increasing and it seemed the sensible way to secure the firm’s funding costs.
		It protects the firm against interest rates rising while still allowing the firm to take advantage of the benefit of falling interest rates.
		On the other hand, if the interest rates on any reset date are higher than the Interest-Rate Cap, the firm will not pay more than the capped rate.
	www.fxfxnet.com /members/treasury/strategies/interest4.htm (494 words)

	Interest Rate Cap
		An interest rate cap provides the customer with a maximum cost of funds The interest rate cap and the underlying loan are two separate transactions.
		An interest rate cap places a ceiling (cap strike) on a floating rate of interest on Credit exposure in an interest rate cap transaction is one-way.
		Interest Rate Cap A provision of an ARM limiting how much interest rates may increase per adjustment period.
	www.indexpark.com /interest/interest-rate-cap (333 words)

	Washington Mutual, Inc. - Form 10-K
		The Company uses forward sales contracts to hedge its exposure to increasing interest rates with respect to fixed-rate loans and loan commitments which the Company intends to sell in the secondary market.
		Interest rate exchange agreements, interest rate cap agreements, and forward sales contracts expose the Company to credit risk in the event of nonperformance by counterparties to such agreements.
		The receipt rate represented the weighted average rate as of the last reset date for each agreement.
	www.wamu.com /about/investorrelations/data/1999/10k/10k_p2_N22.htm (662 words)

	FASB: Cash Flow Hedges: Using a Complex Option as a Hedging Derivative
		The oil-linked interest rate cap purchased by Company A is attempting to hedge Company A's exposure to variability in the net cash flows related to certain revenue inflows and certain expense outflows.
		For those quarters when the cap is knocked out, there are no cash flows from the cap to be used to offset the change in the cash flows on the hedged forecasted transaction.
		Because the cash inflows from the oil-linked interest rate cap are unrelated to the proceeds from oil sales, Company A could not expect the proposed hedging relationship to be highly effective at achieving offsetting cash flows.
	www.fasb.org /derivatives/issueg22.shtml (799 words)

	When is an interest rate cap considered at the money? (Site not responding. Last check: 2007-09-17)
		Would a particular caplet be at the money if its cap rate equaled the current value or 3 month Libor, or would it be at the money if its cap rate equaled the current forward rate for 3 month Libor corresponding to its expiration date?
		In a sense, the underlier of a caplet is 3 month Libor, but by the logic of Black’s 1976 model, the underlier can also be considered to be a forward on 3 month Libor.
		Since implied vols tend to be minimal for at the money options, do implied vols for caplets tend to be minimal when the spot interest rate equals the cap rate or when the forward interest rate equals the cap rate?
	www.contingencyanalysis.com /archive/archive99-3/00000128.htm (184 words)

	AREUEA Journal, Vol. 13, No. 3, 1985 (ResearchIndex) (Site not responding. Last check: 2007-09-17)
		The value of the cap is seen to depend importantly on both the slope of the term structure and the variance of the 1-month rate.
		However, the cap value is not sensitive to the source of the slope of the term structure -- what precise combination of interest-rate expectations and risk aversion determined the slope.
		On the Intertemporal Behavior of the Short-Term Rate of..
	citeseer.ist.psu.edu /592706.html (298 words)

	Interest Rate Cap (Site not responding. Last check: 2007-09-17)
		An interest rate cap provides the customer with a maximum cost of funds ('strike rate') for a predetermined period, whilst maintaining the ability to benefit from lower interest rates.
		The premium cost is determined by the level of protection selected ('strike rate'), term of the cap facility, amount of the cap facility and the volatility of interest rates.
		The premium cost of an interest rate cap may be reduced by entering into an interest rate collar.
	www.nib.ie /0,,33216,00.html (236 words)

	interest rate cap (Site not responding. Last check: 2007-09-17)
		An Interest rate cap is a series of European call options or "caplets" on a specified...
		A cap is an OTC derivative which protects the holder from rises in interest rate by making a payment to the holder when rates exceed a specified strike rate - the
		The cap may also set the maximum interest rate that can be charged during the life of the loan.
	www.lafermemartinette.qc.ca /interest-rate-cap.html (420 words)

	Senate refuses to limit interest rates at 30% (Site not responding. Last check: 2007-09-17)
		WASHINGTON -- The Republican-controlled Senate refused to limit consumer interest rates at 30 percent yesterday as it moved methodically toward passage of legislation making it harder to shed personal debts in bankruptcy.
		The vote was a bipartisan 74-24 to scuttle an amendment by Sen. Mark Dayton, D-Minn., who said consumers must pay interest rates as high as 1,059 percent when they borrow money.
		Dayton's proposal was the latest in a string of unsuccessful Democratic attempts to soften the impact of the measure on consumers.
	www.post-gazette.com /pg/05063/466154.stm (222 words)

	interest rate cap Definition
		A provision of an adjustable rate mortgage limiting how much interest rates may increase in a single adjustment period.
		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.
	www.investorwords.com /2540/interest_rate_cap (214 words)

	Mortgage Interest Rate Cap - Skipton Building Society
		If you have a product cap which is lower than this new variable rate cap, then your product cap will apply for the specified period shown in your Offer of Loan and the variable rate cap will apply if and when the specified period ends or if the product cap is removed at any time.
		If your variable rate is increased under the terms of your mortgage by an 'interest differential' due to a change in the circumstances relating to your account or your property, (e.g.
		If we need to reduce your interest rate in accordance with this guarantee purely because of a reduction in the Bank of England base rate the change will be made within 30 days of the change in the Bank of England base rate.
	www.skipton.co.uk /customer_services/existing_borrowers/interest_rate_cap.asp (546 words)

	Bill targets interest-rate cap - The Honolulu Advertiser - Hawaii's Newspaper (Site not responding. Last check: 2007-09-17)
		The APR reflects the interest rate plus certain charges associated with extending credit — such as finance charges if you carry a balance — and it is expressed as a yearly rate.
		For example, a card with a 10 percent interest rate sounds more enticing to consumers than one with a 12 percent rate.
		A lifting of the cap doesn't necessarily have to be detrimental, the bank said.
	the.honoluluadvertiser.com /article/2005/Mar/06/bz/bz01p.html (1000 words)

	MSN Encarta - Search Results - interest rate cap
		overview, archive articles, elimination of ceiling on interest rates, fixed interest rates, group responsible for controlling interest rates in the...
		Prime Rate, lowest rate of interest charged by commercial banks.
		The prime rate is offered only to the most creditworthy customers and only on...
	encarta.msn.com /interest+rate+cap.html (148 words)

	BBC NEWS \| Business \| DTI says no to interest rate cap
		People in countries where rates are capped are in fact more likely to have financial problems and borrow from illegal loan sharks, the DTI said.
		"We think rate caps could be a very good idea, provided the government comes up with ways that it could pick up the poor people who are driven to illegal lenders," he told BBC News Online.
		The UK has not had interest rate ceilings since the 1974 Consumer Credit Act, which governs the use of credit in the UK, was introduced.
	news.bbc.co.uk /1/hi/business/3601122.stm (466 words)

	Interest Rate Collar (Site not responding. Last check: 2007-09-17)
		An Interest Rate Collar is a combination of an interest rate cap and an interest rate floor.
		The collar retains the most important benefit of an interest rate cap, in that it limits the company's worst case interest cost.
		However, with a collar the upfront premium is reduced, or possibly eliminated, by limiting the company's ability to benefit from falling interest rates to the floor level.
	www.nbonline.co.uk /0,,44106,00.html (210 words)

	Futures (Cedar Falls, Iowa): Exotic options cap interest rate fears. (growing appeal of contingent premium ... (Site not responding. Last check: 2007-09-17)
		The threat of rising interest rates are renewing the appeal of exotic options such as barrier and contingent premium products.
		The uncertainty surrounding interest rates has led to a 57% increase in notional new caps, floors and collars in the first semester of 1992.
		The appeal of caps is attributed to the protection they offer against increasing interest rates while allowing their holders to benefit in case the interest rate declines.
	highbeam.com /library/doc0.asp?docid=1G1:13834988&refid=ink_tptd_mag (201 words)

	Freddie Mac: Multifamily - Adjustable Rate Mortgages (ARM)
		The Freddie Mac Capped ARM allows for a floating-rate for the full term with an established maximum interest rate.
		Since Freddie Mac provides the cap protection, the purchase of a third-party interest-rate cap is not required, which eliminates third-party transaction fees, agreements and negotiations.
		Maximum interest rate for the life of the loan is generally established by calculating the interest rate that provides a DCR of 1.15x
	www.freddiemac.com /multifamily/armcap.htm (885 words)

	Interest Rate Cap
		Doorstep lenders are one of the main targets of the people calling for a cap on high rates of interest.
		Talk of an interest rate cap deflects attention away from the Government's failings and on to companies who are trying to provide a service that is still popular with several million customers being visited each week.
		Some of the groups promoting such a cap give the impression that they are more concerned about their political position than they are about the actual person needing to borrow.
	www.creditaction.org.uk /news/InterestRateCap.htm (656 words)

	Union Bank of California - Adjustable Rate Payment Calculator
		This is the highest interest rate allowed by your mortgage.
		This amount will be added to or subtracted from your interest rate.
		This total interest amount assumes that there are no prepayments of principal.
	www.uboc.com /about/main/0,,2485_2887,00.html (267 words)

	interest rate swap \| New resources for interest rate swap (Site not responding. Last check: 2007-09-17)
		Interest Rate Swaps Interest Rate Swaptions Interest Rate Swaption Collars Interest Rate Caps Interest Rate Collars Interest Rate Swaps In Simple Terms An Interest Rate Swap is a way of achieving a...
		Interest Rate Swaps ticker tiny small compact medium wide full report End-of-day and historical International Swaps and Derivatives Association mid-market par swap rates for a Fixed Rates Payer in...
		Interest Rate Swap Example Assume a swap covers a five-year period and involves annual payments on a $1 million principal amount.
	www.1st-interest-rate.info /interestrateswap (1340 words)

	AMF BOWLING WORLDWIDE INC Quarterly Report (10-Q) ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT ...
		The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates that could impact its results of operations and financial condition.
		At March 28, 2004, one interest rate cap agreement was outstanding.
		While the Company is exposed to credit risk in the event of non-performance by the counterparties to the interest rate swap agreements, in all cases such counterparties are highly-rated financial institutions and the Company does not anticipate non-performance.
	sec.edgar-online.com /2004/05/12/0001193125-04-085968/section8.asp (467 words)

	Interest Rate Cap (Site not responding. Last check: 2007-09-17)
		An Interest Rate Cap provides the Company with the protection against increases in interest rate levels.
		In this respect the cap is like an "insurance" against high interest rates.
		The Company continues to enjoy the benefit of lower rates while remaining protected against adverse increases.
	www.citibank.com /elsalvador/svco/english/svco125.htm (56 words)

	Guidelines for Conversion of Loan Terms for ADB LIBOR-Based Loan Product - ADB.org
		The Borrower may specify the maximum fixed interest rate or spread over LIBOR it is willing to pay under an Interest Rate Conversion or Currency Conversion.
		4.33 If the Borrower is requesting an Interest Rate Cap or Interest Rate Collar, it may specify the maximum premium to be paid on the Interest Rate Cap or Interest Rate Collar.
		4.36 Given the volatility of interest and exchange rates, ADB can give no assurance that it will be able to actually obtain the rate specified in the Conditional Request, even if such a rate were to prevail at any given point during the Execution Period.
	www.adb.org /Documents/Guidelines/LIBOR/sect4100.asp (267 words)

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