Derivatives
Flexible Cap
March 18, 2021
Derivatives
Forward Rate Bracket
March 19, 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 Mulligan cap buyers against upward movement in interest rates would also be less than usual.

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

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