Participating Cap
The participating cap is a special form of the zero-cost collar . The combination also consists of an interest rate cap and an interest rate floor (interest rate cap long and interest rate floor short). The difference to the zero-cost collar is due to the fact that the nominal of the interest rate cap is greater than that of the interest rate floor.
background
Should interest rates fall contrary to expectations, then the risk of a falling interest rate level has been reduced, as the nominal at the lower end (floor) is lower.
See also
swell
- Mary S. Ludwig: Understanding interest rate swaps. McGraw-Hill, New York NY et al. 1993, ISBN 0-07-039020-7 , p. 160.
- Karl Friedrich Hagenmüller , Reinhold Adrian, Thomas Heidorn: The banking business. Textbook and assignments. 15th revised edition. Gabler, Wiesbaden 2000, ISBN 3-409-42158-0 , p. 393