Cap Pricer
Price an interest rate cap on your loan's own dates and notional schedule, with an estimated bank charge, running cost, breakeven and a strike/tenor price grid.
The Cap Pricer gives an indicative price for an interest rate cap on your loan's own schedule, and compares capping with fixing through a swap and staying floating.
1. Describe Your Cap
Go to Cap Pricer
In the Your cap panel on the left, choose:
Reference rate: the floating rate your loan pays (e.g. SOFR, SONIA, 3M EURIBOR).
Tenor: 1Y to 30Y from spot, or Custom dates to use your loan's own dates (see step 2).
Payment frequency: Monthly, Quarterly or Semi-annual. Each period is one caplet.
A line under the frequency confirms the schedule: start and end dates, number of periods and the first payment date.
2. Use Your Loan's Dates (Optional)
Choose Custom dates in Tenor to enter:
Start Date: when the cap starts. Leave it empty to start at spot.
Cap maturity: when the cap ends.
First interest payment date (optional): your loan's first payment date. A date earlier than one full period gives a short first period, a later date gives a long first period, and regular periods run on from it. Leave it empty for regular periods from the start date.
If the maturity is off the regular cycle, the last period is short. The schedule line shows any short or long period with its dates and number of days.
3. Set the Notional
Enter the Notional, then pick a Notional shape:
Bullet: the same balance in every period.
Custom profile: a balance for each period, for amortising loans, drawdowns, or a build-up followed by a paydown. It opens the Custom notional profile panel with one row per period of the schedule:
Paste a column from Excel starting at row 1, or click a cell to type a balance.
Use Fill to pay down a fixed amount per period from a chosen row, for straight-line amortisation, then click Apply.
Click Save profile.
The form then shows the profile as a small chart with its number of periods and peak balance. Click Edit to change it. If you change the dates afterwards, the balances carry over to the new periods and the form asks you to Review them.
4. Set the Strike, Margin and Bank Charge
Strike (%): the rate ceiling. Leave it empty to price at the money, or click ATM or ATM + 50bp under the field.
Loan margin (%): your loan's margin over the reference rate, used when the cap is compared with a swap and staying floating.
Click Price Cap.
After the first price, a Bank charge field appears next to the margin. By default the price includes our estimate of the bank's charge, based on the rate and volatility risk the bank takes on when it sells the cap. If your bank has quoted a fee, enter it in the cap's currency to override the estimate, then click Price Cap again. Clear the field to go back to the estimate, or enter 0 to see the mid-market price on its own.
5. Reading the Results
Indicative Cap Price is the upfront price: the mid-market price plus the bank charge. The line under it shows the split, with the bank charge marked (estimated) or (your fee). Use Download Excel or Generate Presentation to share the result.
What this means puts the price in borrower terms:
Spread over the loan, it costs: the running cost, the upfront price expressed as a rate per year over the loan. If you pay for the cap through the loan instead of upfront, banks usually add a financing spread, so the yearly cost would be higher.
The cap pays you whenever ... is above: the strike. Together with the loan, your interest is effectively capped at the strike plus your margin.
It beats staying floating if ... stays above: the breakeven. If the rate stays above this level for the whole term, the cap pays out more than it costs.
The alternative: a swap fixes ... at: the swap rate on the same schedule, mid-market plus a bank spread, so it compares like for like with the cap price.
The running cost and the breakeven both include the bank charge, so they move when you override it.
Below the summary, four tabs give the detail:
Price: the Cap Price Grid of indicative prices across tenors and strikes. Click a price to price that tenor and strike. How this was priced lists the cap's dates, payments, notional and strike, the mid-market price, bank charge and time value vs intrinsic, and the market inputs.
Cap vs Swap: a short summary, total interest if rates move for Floating, Swap, Cap and a 50/50 blend, the forward rate path against your strike, and the outcome of each choice if the forward curve shifts.
Cashflows: one row per period with start and end dates, notional, forward rate, strike and caplet price.
Price history: this cap's indicative price at each Friday close, with the same strike, tenor and notional.
6. Supported Indices
The Cap Pricer supports 30+ indices including:
G10: SOFR, SONIA, 1M/3M/6M EURIBOR, SARON, TONAR, 3M/6M TIBOR, 3M CDOR
Nordics: NOWA, SWESTR, STINA, DESTR, CITA
Asia-Pacific: 3M HIBOR, HONIA, 3M KLIBOR, OCR, NZONIA, 91D CD, 3M TAIBOR, 7D REPO
Middle East & Africa: 3M SAIBOR, 3M JIBAR, ZARONIA
LatAm & CEEMEA: TIIEON, 3M/6M PRIBOR, 3M/6M BUBOR
Related
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