Selling a Cap is equivalent to ???

[Rasec]

I said selling a call option.

I go the answer wrong! Can you please explain?

The type of options package (introduced in question 1) depends on whether the underlying is a rate or a fixed-income instrument. A general statement claiming that caps are equivalent to call options is not correct and requires further analysis of the underlying.

[Mosstastic]

what is the answer? shorting the underlying instrument?

[darshanP]

Dude I can’t figure out what are you trying to ask or say…

Write and elaborate properly.

Thanks

[MrSmart]

@Rasec

I said selling a call option.

I go the answer wrong! Can you please explain?

The type of options package (introduced in question 1) depends on whether the** underlying is a rate or a fixed-income instrument.** A general statement claiming that caps are equivalent to call options is not correct and requires further analysis of the underlying.

There’s your answer.

[zaydalnakib]

selling a cap should be like selling a put on a bond or several caplets

[MrSmart]

@zaydalnakib

selling a cap should be like selling a put on a bond or several caplets

Selling a cap on a bond you’ve bought is like selling a call option on the bond, since it limits the upside potential for the investor, and therefore demands a premium on the cap/option, or a discount on the bond.