A nonstandard interest rate cap in which the cap rate for each caplet is equal to the sum of the LIBOR rate at the previous reset date and a specified spread. For example, let the previous LIBOR rate be 5% and the spread be set at 1%, then the cap rate of the ratchet cap is 5% plus 1%, or 6%.
Derivatives
Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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