Can someone help me understand how capped floaters will benefit the issuer?
In terms of the reasoning behind it being similar to a callable bond.
Also, can some one give me the reasoning behind floored floaters being closer to put option ?
For capped floaters, If rates go up, the issuer will not have to pay higher than the cap on the interest rate. If rates fall, he would pay the lower rate ( like a callable bond being refinanced at a lower rate). If rates go up you would get the higher rate (like a put where the lender could refinance at a higher rate by putting the bond). If rates fall, you would still get the floor.
Thanks Boss 