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Pay-as-you-go cap
       
 
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Pay-as-you-go cap

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Pay-as-you-go cap
A pay-as-you-go Cap allows the buyer to pay for protection from upward moves in an Interest rate for only as Long as necessary. Usually, the Holder Will pay an initial Premium (which Will be small compared with the Premium for a normal Cap) and a further payment at each reset date. The Holder can cancel the Cap when he or she feels that the protection is no longer needed. A pay-as-you-go Cap is useful for those who feel that caps are too expensive, that Interest rates Will eventually stabilise below the capped level, or that rates are in a Short-lived ‘spike’ move. Also known as an installment Cap.
Posted by  Privatebanking.com
 
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