iteracom

wow! thanks a lot gangsta...

guess continuing on the same note, another qn in the same vignette offers choices on constructing a collar.

My problem is that I don't understand the motivation of one against the other

Reichmann finds that interest rate volatility increases. so wants to hedge using a collar

Here goes the qn.
What would be the most appropriate way to construct an interest rate collar to hedge against the fixed rate portion of the portfolio using 2-yr 6% floor and a 2-yr 12% cap?
1)Buy the floor buy the cap
2)Buy the floor sell the cap
3)Sell the floor buy the cap

Any help here too is much appreciated