A discrete barrier option which places a barrier cap on its underlying movements. A discrete barrier cap is similar to a standard cap except that the payoff of its underlying caplets is conditional on the event that previous spot LIBOR rates have or have not broken through a specific level, known as the barrier. This cap is characterized by a series of barriers and strikes. A given caplet only pays out in case all previous spot LIBOR rates are above (up-and-in) or below (up-and-out) their barriers. The barrier condition is reviewed every fixing date, i.e., it is monitored only at discrete points in time.

Like a regular barrier cap, this barrier cap comes in two different types: up-and-in discrete barrier cap and up-and-out discrete barrier cap.