SERVICES   Arbitrage Rebate Calculations   Bond Structuring   Cashflow Forecasting   Escrow Structuring   Municipal Reinvestment Strategy   Spreadsheet Modeling   Swap Services   PRODUCTS   Escrow Contract   Forward Purchase Agreement   Funding Agreement   GIC   Interest Rate Cap   Interest Rate Collar   Interest Rate Floor   Interest Rate Swap   Liquidity Put   Open Market Securities   Repurchase Agreement   Rolling Commercial Paper   Security Contract   Forward Starting Swap   Surety Delivery Agreement

HOME       CONTACT       PERSONNEL       COMPANY       LINKS       NEWS           Interest Rate Cap When variable rate bonds are issued, the issuer can pay an upfront premium to buy a “cap” from a provider (typically a bank) for protection against rising interest rates. On each re-pricing date, if the interest rate exceeds the pre-determined maximum rate (the “strike rate” of the cap), the issuer receives the difference from the provider. Typically, the up-front payment is more expensive for lower rates and/or longer maturities.