[goswamigora82]

Sir – As you said in your example, we have to buy interest rate put option, so that in case interest rate increase the future price will decrease. So, We will exercise the option and will buy future from market at lower future price (due to increase in interest rate). For Borrowers have to buy put option. I m sorry, I didn’t understand how the statement about borrower buy put option is wrong. I also referred the notes again and it recites the same (If i understand correctly).

I am confused how a interest rate cap which is essentially a instrument for borrowers are said to be a set of call options.

Appreciate your support.

[Author]

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