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2#
发表于 2011-7-13 13:47
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I will try....
Cap ->
is a Call on an Interest Rate.
Cap could be active (bought / sold) for multiple periods.
Long Cap gains when the Reference Rate > Strike Rate on the Cap.
In order to value the Cap - consider each period separately - evaluate the Cap at each of those periods, and then sum up the values of the individual Caps. It is thus equivalent to a package of interest rate options. (for the purposes of valuation).
In the above - you were LONG a CAP.
Now if you flip this around, and instead think in terms of a Fixed Income Bond instrument.
When rate rises - Fixed Income Bond loses value.
So you need to have bought a Put (Long Put) on a Fixed Income instrument to have the same pay off structure. If the rate rises, you have (as the holder of the put) the option to put the bond back.
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Long Cap on Interest Rate = Long Put on Fixed Income Instrument.
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Short Cap on Interest Rate
When Interest rate goes up - and above the reference rate -> you pay
When Interest rate goes up -> Fixed Income instrument falls in value.
Sell a Put on Fixed Income instrument - it will be put to you, when Interest rates go up (since Put is at the behest of the option holder).
So Short Cap on Interest Rate = Short Put on Fixed Income instrument.
If you had a Short Call on Inter
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