If an investor with a LIBOR-based liability, you would purchase a cap and sell a floor
If investor have a LIBOR-based asset, you would purchase a floor and sell a cap.
What do they mean by LIBOR-based asset or a LIBOR-based liability?作者: Pegasus2008 时间: 2011-7-11 20:04
The way I would think about LIBOR based liability. Liability means you are taking a loan. Imagine mortgage rates and ARM expiring. So you want to CAP the high interest rate risk on a loan. Buy a CAP and sell the floor. Think opposite for asset.作者: tobeornottobe 时间: 2011-7-11 20:04
