In a cap or floor, the only party that is required to perform is the:
A) Buyer.
B) Seller.
C) Asset/liability manager.
D) Depository institution.
E) None of the above.

Question

Quizplus · Accepted Answer

In a cap or floor agreement, the seller is the only party obligated to perform. This is because the seller must compensate the buyer if the underlying interest rate exceeds the cap rate or falls below the floor rate, depending on the contract type.

In a Cap or Floor, the Only Party That Is