Deferred Cap Floating Rate Note

A capped floating rate note that is associated with a deferred cap. In other words, it comes with a maximum coupon (cap) on interest payment that comes into effect at some future date. For example, a floating rate note may have a term of 2 years and a deferred cap that becomes effective after 6 months over its term. This feature is usually meant to accommodate investors’ requirements as to capping their interest payment later at some future date rather than at commencement.