Interest rate option

An interest rate cap is a transaction in which the seller of the option pays, on a one-time basis or in instalments, floating amounts in a given currency calculated based on the notional amount in such currency and based on the difference between the floating interest rate and the limit interest rate where such difference reaches a positive value, i.e. the floating interest rate for a given interest period is higher than the limit interest rate. The buyer of the option pays a premium for this interest rate hedging.

Product features

• Guarantees the buyer a maximum amount of interest expenses (cap).
• Buyer may benefit from a drop in interest rates.
• Flexibility of parameters - easily adjustable to the structure of the underlying asset (loan)
• Can be sold at any time.
• Buyer pays a premium.

Product variants

• Interest rate collar - combines an interest rate cap and interest rate floor. Normally offered as a zero cost strategy.
• Option strategy and a combination with an interest rate swap tailored to suit your needs depending on actual market conditions.

An interest rate floor is a transaction in which the seller of the option pays, on a one-time basis or in instalments, floating amounts in a given currency calculated based on the notional amount in such currency and based on the difference between the floating interest rate and the limit interest rate where such difference reaches a negative value, i.e. the floating interest rate for a given interest period is lower than the limit interest rate. The buyer of the option pays a premium for this interest rate hedging.

Product features

• Guarantees the buyer a minimum interest rate (floor).
• Buyer may benefit from a growth of interest rates.
• Can be sold at any time.
• Buyer pays a premium.

Product variants

• Interest rate collar - combines an interest rate cap and interest rate floor. Normally offered as a zero cost strategy.
• Option strategy and a combination with an interest rate swap tailored to suit your needs depending on actual market conditions.