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  • February 25, 2022
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Bounded Barrier Cap

A barrier cap which has also the features of a bounded cap. Payment to the cap buyer is made only if an underlying index or reference rate, such as LIBOR, breaks out above a specified barrier level. However, the cap payout is limited to a specified amount over its term. This combination of features makes the premium of a bounded barrier cap (paid to the seller) generally lower than that of a barrier cap or a vanilla cap, but, of course, for less protection than both.


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