- This topic has 1 reply, 2 voices, and was last updated 10 months ago by
John Moffat.
John Moffat.Viewing 2 posts - 1 through 2 (of 2 total)
-
Posts
-
syedmushahid
- Topics: 18
- Replies: 35
- ☆☆
Sir as per your lecture interest floor is the minimum an investor set for himself on deposit
And collar the max on borrowing
There is a questio in Kaplan kitThe cost of interest rate floor is higher than the cost of an interest rate collar
(True/false)
To me it looked false but kit says true.how?
John Moffat
- Topics: 57
- Replies: 49602
- ☆☆☆☆☆
That is true. We pay a premium to fix the floor, but if we create a collar then we also receive a premium from the person we sell an option to and this creates a cap.
I do explain collars in detail in my free lectures on the management of interest rate risk.
syedmushahid
John MoffatViewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.