Derivatives
Bounded Barrier Floor
February 25, 2022
Islamic Finance
Eiarah
February 25, 2022

A modified interest rate cap in which the total payout is limited (bounded). The payout is similar to that of an interest rate cap, though limited over the life of the cap to a fixed monetary amount. This feature renders the bounded cap less expensive than a typical interest rate cap, but at the expense of the protection it provides relative to a standard cap.

The bounded cap is also referred to as a “B Cap”.

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