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Caps & Floors - An Introduction

While options are powerful instruments that can be used to manage many kinds of financial risks, some specific forms of options are particularly useful in the commercial world. Caps, floors, collars, and swaptions are tailored forms of options that have found ready applicability in many borrowing and other financial transactions. In this course, we will explain the structure of standard caps and floors and discuss some of the variants that have been developed.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Explain how caps and floors work and how they are used to hedge interest rate risk

    Describe the different types of caps and floors that have been developed due to market demand

    Describe how to combine caps and floors

  • COURSE OUTLINE

    Topic 1: Types of Caps & Floors

    Auto Caps

    Chooser Caps

    Constant Maturity Swap (CMS) Caps

    Knock-in and Knock-out Caps

    Average Rate Caps

    Rental, Compound and Instalment Caps

    Captions

    Digital Caps

    Conditional Caps

    Reset Caps

    Swaptions

    Topic 2: Combination of Caps & Floors

    Collars

    Corridors

    Participating Caps

    Topic 3: Basics of Caps & Floors

    What is a Cap?

    Elements of a Cap

    What is a Floor?

    Elements of a Floor

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    50 Minutes

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