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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


1. An upper limit on the interest rate to be paid on a floating-rate note.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005


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

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.


Same as Float-Down.

The Mortgage Encyclopedia. Copyright © 2004 by Jack Guttentag. Used with permission of The McGraw-Hill Companies, Inc.
References in periodicals archive ?
The Dietitian said that Camel milk was a natural probiotic that was 50 per cent lower in regular and saturated fat than cow milk.
"Today, Naryn, Osh and Issyk-Kul regions are engaged with camel breeding.
"We source our camel milk from farmers in Voi and Isiolo.
The vice chancellor said that the country's camel breeds were some of the best.
He said that the country's camel breeds were one of best breeds and called for taking steps to preserve the breeds.
Camel milk is traditionally known to have many medicinal properties.
Diptelonemasis positive camel samples shows decrease in PCV, RBCs, Hb and platelets count and increase in TLC as compared to healthy camel samples.
He said in 2013, camel trainers came from Kenya to impart knowledge on camel training and handling.
Future sponsored races include the Saham Camel Race in December 2018, the Adam Camel Race in December 2018 and the Ibri Camel Race in January 2019.
The Central Illinois Regional Dispatch Center received a passerby report of a camel located in a field off of Boyd Rd.
Summary: New Delhi [India], Aug 21 (NewsVoir): Aadvik Foods is India's first company to process, brand and market camel milk and its products in the country.
Summary: An Australian dairy is all geared to supply the world with camel milk, with a herd of wild camels that's the biggest in the world