Derivatives

Lookback Strike Option

October 18, 2022
Finance

Meaning of a Haircut

October 18, 2022

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A step-up cap which applies the minimum level of a given benchmark rate (index rate) as observed in the reset period in order to compute the maximum periodic increase in the capped rate. This structure effectively reduces the strike on the cap. Therefore, the periodic increase and/or the cap premium in this type of cap are larger than that of a regular step up cap.

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