Hedging Series: “Interest Rate Cap” [Chapter 7]
What is an interest rate cap? When you are commercial real estate borrower and you have floating rate exposure, a way to mitigate that risk is maybe not locking in fixed rate certainty but buying disaster protection; putting a ceiling on LIBOR. That is an interest rate cap. It is an option that’s paid for up front and you have a ceiling on LIBOR.
This is the seventh video — focusing on, “Interest Rate Swap” — in a series of eight episodes on the topic of Hedging presented by Jillian Mariutti.
Watch the previous chapters below: