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Capped Floater Swap


An interest rate swap in which both legs are based on floating rates. One leg is capped, that is, the structured swap pays a coupon only up to a preset maximum level of the reference index. In addition to receiving the capped leg, a positive spread linked to LIBOR is also received by the payer of the other leg. In effect, this positive spread is similar to a periodic premium.



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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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