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  • August 17, 2021
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Ratchet Cap

A nonstandard interest rate cap in which the cap rate for each caplet is equal to the sum of the LIBOR rate at the previous reset date and a specified spread. For example, let the previous LIBOR rate be 5% and the spread be set at 1%, then the cap rate of the ratchet cap is 5% plus 1%, or 6%.


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