Cap Option

AFM

Suppose as on 31st March LIBOR is 9% (i.e. applicable for June Interest payment ) Now RIL want to limits its interest rate to 8%. Why the bank will agree to compensate 1% as they allready know the LIBOR as on 31st March. Instead bank will not enter into such option agreement. What is the logic behind bank will enter into such option contract even though knowing the LIBOR each other. [Video Time Stamp: 12:35] Video Details ------------- Advanced Financial Management - AFM Interest Rate Risk Management #26. Interest Rate Options - Cap

G Chandrakanta

CA Final

★ 15K+

10-Apr-26 17:27

Answers (1)

That is why the cap will not be for immediate payment but from next payment onwards for which libor is unknown

Sriram Somayajula

Admin

11-Apr-26 09:33