I have a tricky question… This has come up as part of a mock exam question. Thanks in advance for answering! But please quote your source!
The periodic cash settlement for an interest rate cap (or floor) happens…
A. as the floating rate is determined in the market (like a Forward Rate Agreement);
B. one period after the floating rate is determined in the market (like an Interest Rate Swap).
Again, please quote your source! Preferably, a curriculum source.
I’ve seen both sayings, so I’m confused now. I’m not yet to find the answer in the curriculum… Must be somewhere in there!