A capped floating rate note (capped FRN) 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.
March 13, 2025
