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An upper limit on the interest rate on a floating-rate note (FRN) or an adjustable-rate mortgage (ARM). Also, an OTC derivatives contract consisting of a series of European interest rate call options; used to protect an issuer of floating-rate debt from interest rate increases. Each individual call option within the cap is called a caplet. Opposite of a floor.


1. Informal for market capitalization.

2. In a floating-rate note or an adjustable-rate mortgage (ARM), the highest possible interest rate. For example, if one has an adjustable-rate mortgage on a house, the interest rate fluctuates periodically. However, if the homeowner has a cap on the interest rate, there is a guarantee that it will never rise above a certain percent, no matter what the ARM formula would otherwise dictate. A cap is designed to protect the person or company making the interest payments. See also: Floor, Collar.


1. An upper limit on the interest rate to be paid on a floating-rate note.


A cap is a ceiling, or the highest level to which something can go.

For example, an interest rate cap limits the amount by which an interest rate can be increased over a specific period of time. A typical cap on an adjustable rate mortgage (ARM) limits interest rate increases to two percentage points annually and six percentage points over the term of the loan.

In a different example, the cap on your annual contribution to an individual retirement account (IRA) is $4,000 for 2006 and 2007 and $5,000 in 2008, provided you have earned at least that much. If you're 50 or older, you can make an additional catch-up contribution of $1,000 each year.




A ceiling on the adjustments that can be made in the payments or interest rate of an adjustable-rate loan.


Same as Float-Down.

References in periodicals archive ?
The tradition of wearing the skull caps dates back to the Mughal era as the Emperor Aurangzeb, who hand-stitched the cap, introduced it to the
He is authentic to the core in his desire for young kids to be protected from injury and believes the isoBLOX Skull Cap with Impact Protection offers players and parents meaningful protection.
The isoBLOX Skull Cap With Impact Protection fits snugly over the youth players' head and comfortably under the stretch-to-fit or adjustable baseball cap.
I do not think much importance should be given to sporting a skull cap as wearing it does not mean anything much.
The skull cap will give me additional protection and the consultant advised that I use one for at least a year as an added precaution.
The main offender was aged between 30 and 40, more than 6ft tall, of slim build, wearing a black skull cap and dark clothing.
And the 44-year-old admitted that going bald is the reason he always wears a hat or skull cap.
That robber was described as about 20 and was wearing a white T-shirt, blue jeans and a black skull cap.
The OT outfit handed over a bag of goodies from their bulging megastore to the Maccabi directors - including a special version of the Jewish religious skull cap.
Maxine Page looked stunning in a skull cap hat and low-cut dress.
It includes cow print trousers with matching skull cap and neckerchief.
The new specimen includes much of the face, part of the skull cap and the entire upper jaw with all its teeth save for one molar.