An interest rate cap the rate in which is an average of the reference rate over a specific period of time. The strike rate can be a fixing of the reference rate (and hence it is called a floating average cap) or a fixed rate (so it is known as a fixed average cap). The average can be calculated in various ways: arithmetic, geometric, weighted, partial averaging over a window, etc. As such, the average cap is less sensitive than vanilla caps to huge changes in market conditions or influential manipulations by traders.

The average cap is also known as an Asian cap or an average rate cap.