From what I understand, an interest rate cap gives the holder the right to exercise the underlying options and borrow at a specific rate at multiple dates in the future. The rate is fixed i.e. capped.
This is can be viewed as a portfolio of call options on interest rates.
My questions is:
Say we have a cap with 4 underlying options (caplets). Say there are 4 payment periods.
So does this mean at the beginning we have in our portfolio:
Call option 1 - expires at time 1
Call option 2 - expires at time 2
Call option 3 - expires at time 3
Call option 4 - expires at time 4
Basically I want to know whether at the outset we have a portfolio of call options each of which expire at different dates in the future (in this case at 4 different dates)
Any help is much appreciated.