A path-dependent interest rate option (specifically, an interest rate cap) which protects its holder against increases in total interest obligations over a particular period of time. The interest rate resets many times so as the final interest expense is determined for the whole period. In that sense, and in contrast to standard caps, the payment cap doesn’t provide a period-to-period protection.

The payment cap is alternatively known as a cumulative cap, a quantity cap or a Q-cap.