What is CAP?

An OVERTHECOUNTER INTEREST RATE OPTION contract that provides the buyer with a payoff when an underlying interest rate reference exceeds a predefined STRIKE PRICE. See also CAPTION, FLOOR, FLOORTION.

More On This Topic



Link to This Definition
Did you find this definition of CAP helpful? You can share it by copying the code below and adding it to your blog or web page.
Written and fact checked by The Law Dictionary