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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 ?
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Note: The top of the pen cap should stick out of the water.
A critical difference between a CDP and a CAP case is the time it takes to move through the process.
Twenty thousand tons of tin plate for making cans, from CAP, head to Japan each year.
Caps for the cryogenic and electrical ports inside the SVML are also available.
The cost to produce a cap is $5, and 25,000 people may see the cap in its lifetime.
Unless Congress pulls a last-minute switcheroo--in which case, read this article as what might have been--the long-awaited (and fretted over) Medicare outpatient rehabilitation therapy caps have just gone into effect as you read this--on July 1, to be exact.
She proudly displays her collection of caps in her office at the Welcome Center, where she has worked since 1988.
With the market run-up in the last few years, classifying companies as large, mid or small cap has become more difficult.
Collars are a combination of a cap and a floor, whereby one party pays the other ira certain price moves above the cap price in exchange for possible payments when prices fall below the floor price.
Though CAP initially provides grants to the local community committees, they must eventually raise their own funds or make a significant contribution to the program effort.