Islamic Finance
Islamic Finance Window
March 18, 2021
Derivatives
Mulligan Cap
March 18, 2021

An interest rate cap in which the number of caplets are less than reset periods. This feature makes a flexible cap cheaper to buy than an ordinary cap (vanilla cap). But of course, that comes at a cost, where protection offered to the flexible cap buyers against upward movement in interest rates would also be less than usual.

The flexible cap is also referred to as a Mulligan cap.

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