Chatham Cap Calculator
Calculate interest rate cap premiums, payouts, and protection scenarios. Hedge against rising interest rates with precision!
Payout = max(0, Rate - Cap) \times Notional \times Period • 🛡️ Rate Protection • 📊 Risk Management • 💼 Derivatives
Cap Parameters
Principal amount
Strike rate
Market Assumptions
Rate Protection Gauge
3.5%
Protected Below Cap
Protection Shield
Current Formula:
Cap Properties:
Type: Interest Rate Cap • Settlement: Cash • Exercise: European Style • Currency: USD
Protection Level
No Protection
70% Protected
Full Protection
Cap Analysis Results
Premium ($)
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Cost (bps)
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Breakeven (%)
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Max Annual Payout
Payout Scenarios
Rate Sensitivity Analysis
"Risk comes from not knowing what you're doing."
- Warren Buffett
Risk Analysis
Protection Analysis
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Cost Efficiency
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Timing Considerations
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Strategy Fit
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Interest Rate Cap Guide
What is an Interest Rate Cap?
An interest rate cap is a derivative contract that provides protection against rising interest rates. The buyer pays a premium upfront and receives payments when rates exceed the cap level.
Payout = max(0, Current\ Rate - Cap\ Rate) \times Notional \times Period
Key Cap Formulas
- Premium Cost: Notional \times Premium\ (bps) \times Term
- Breakeven Rate: Cap\ Rate + \frac{Premium}{Notional \times Term}
- Intrinsic Value: max(0, Current\ Rate - Cap\ Rate)
- Time Value: Premium - Intrinsic\ Value
Cap Advantages
- Rate Protection: Limits exposure to rising interest rates
- Flexibility: Maintains ability to benefit from falling rates
- Customizable: Terms can be tailored to specific needs
- No Margin: Premium paid upfront, no ongoing margin requirements
Risk Considerations
- Premium cost if rates don't rise above cap level
- Counterparty credit risk
- Basis risk between reference rate and actual borrowing rate
- Early termination costs
- Accounting and tax implications