what is cap & floor of call rates?



what is cap & floor of call rates?..

Answer / mayur

CAP sets upper limit on the bond rates and floor sets
minimum limit on the bond rates.When issuer and bond holder
both do not want to get expose to the fluctuating market,
floor and Cap rates are set.Wherein the issuers will not
pay more than the CAP rate and bond holder will not recieve
less than the floor rate. When both are present in bond it
is called collar.

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