An option (cap) that has no up-front premium (therefore, it is a variant of deferred premium option). In a self funding cap, the predetermined premium is paid only at the strike reset dates where the cap is in-the-money. If the cap expires out-of-the-money, the buyer will not have to make any payment. In exchange for the deferment of its payment, the premium of a self-funding cap is higher than that of a regular cap.
August 20, 2024
