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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 cause of cradle cap isn't entirely clear, although it may be linked to overactive sebaceous glands, which are glands in the skin that produce an oily substance called sebum.
Mum Nicola found it really did work in reducing cradle cap, but it did leave her hair rather greasy.
Credited as the "newborn's best friend," Bean-B-Clean is the number one option for cradle cap (seborrhea) removal in infants and senior citizens.
If your baby has cradle cap, they may go on to develop eczema, so try to avoid using products containing perfumes.
Helps ease wind and colic * and strengthens digestive system Soothes skin conditions and * allergies such as eczema, cradle cap and happy rash Stimulates all the organs and * systems of the body
Cradle Cap: During the first three months of life, some babies will develop cradle cap.
CRADLE cap is a yellow, flaky or slightly greasy looking skin problem that affects some new babies.
With an array of the best skin-nurturing products, Susan Brown's Baby also promotes child-friendly moments - Botanical Body & Massage Oil fosters intimacy through the power of touch, and All Purpose Botanical Gelee(TM), a safe alternative to petroleum jelly, helps to treat tender skin conditions including cradle cap and eczema.
Q MY two-month-old baby has really bad cradle cap and it looks horrible.
A Parents are particularly upset to see the appearance of cradle cap (crusta lactea), usually limited to the scalp, but it can also be seen on the forehead, eyelids, ears and nose and the back of the neck.