Buying a cap is similar to buying a call option on bond prices.

Name: Buying a cap is similar to buying a call option on bond prices.
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Buying a cap is similar to buying a call option on interest rates, not bond prices. Caps are financial derivatives that protect against rising interest rates by setting a maximum (cap) rate, while call options on bonds give the holder the right to buy bonds at a specified price, which is more directly related to the bond's price rather than interest rates.

Buying a Cap Is Similar to Buying a Call Option