Caplet and Floorlet Payoff

CFA Level II
#1

Are caplets and floorlet payoffs paid the following period? I know that Wiley showed that (and it makes sense) but I can not find it in the curriculum.

Wiley Mock had an example:

What is the 180th day pay-off for the caplet? It was actually the 90th day Value = (Rate @ 90 - Caprate) * 90/360 * Notional. CFAI text does not address this. They just show tables of the payoffs corresponding to the calculation day.

Hope the real thing doesn’t throw in a curveball like this.

#2

Caps/Floors are all paid in ARREARS. This is why you must discount the payoff by the current rate.

The Wiley example you use is correct. To add, you should actually be discounting the “180th day payoff” by the current 90 day rate to find the actual value at expiry.