Sorry I am confuse. 1) For a Interest Rate Future. The price of the long position will drop if interest rate rise. 2) For a call option on interest rate future, the buy has the right to buy the future contract (Long Position) at the strike price. 3) A cap is a serious of call on interest rate future. The cap are suppose to provide income to reduce the loss when interest rate rise. But, since a call option give you a right to take a long position in a Interest Rate Future, it will actually experience a drop in price. Would someone explain to me where did I get it wrong? Also, for plan vanilla interest rate swap, is the mkt value calculated in terms of the fixed rate payer? So, if LIBOR > fixed rate then mkt value = positive, if LIBOR < fixed rate then mkt value = negative.