An interest rate derivative (specifically, an interest rate option) which allows the holder to receive an interest rate payment during a specific period of time if interest rates rise above a pre-defined level. In this sense, a caplet guarantees a maximum level of floating interest rate for one particular date. In other words, an interest rate caplet is a single call option on interest rates. In return for the right to exercise such an option, the holder pays a premium.

An interest rate cap is a sum of continuous series of interest rate caplets.