you either: 1. buy a cap and sell a floor if you have a LIBOR based liability (you are paying int.) 2. sell a cap and buy a floor if you have a LIBOR based asset (getting paid int.) Correct? any easy way to remember this…I am thinking I have to protect myself when I pay int. by getting the excesss from a cap in case rates go up and protect myself from getting to little int. if rates drop by someone else paying me the diff if rates drop… anyone has an easier way to remember this? Thanks
looks good to me… don’t have a neat way to remember it, but i like your logic.