Interest rate cap - Financial definition
Financial acronyms
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Concise definition of the term interest rate cap
An interest rate cap is an over-the-counter contract between two counterparties which allows its buyer to protect himself against a rise in interest rates exceeding a certain predetermined level against the payment of a premium.
Comprehensive definition of the term interest rate cap
Caps can be used to guarantee a maximum cost of funds on a floating rate loan whilst still taking advantage of lower rates should they occur.