(1) the maximum allowable interest rate increase for adjustable rate mortgages.' cap's embedded in mortgage agreements may limit the amount of upward change in the rate of interest at each adjustment period and provide a fixed maximum over which the rate cannot rise during the life of the loan. (2) an agreement negotiated between a buyer and seller. The buyer of a cap agreement pays a fee to the seller. In return, the seller will pay the buyer if a designated floating index rate is higher than a specified fixed rate on designated days. The seller pays nothing If the floating rate is below the fixed rate. Buyers of cap agreements use them to hedge against rising interest rates, because payments to the buyer increase as rates rise. See: floor. See: collar.
| APA | Barry Goldsmith. (2010). cap. Retrieved September 22, 2026, from http://smartdefine.org/cap/definitions/1149332 |
| Chicago | Barry Goldsmith. 2010. "cap" http://smartdefine.org/cap/definitions/1149332 (accessed September 22, 2026). |
| Harvard | Barry Goldsmith 2010, cap, Smart Define, viewed 22 September, 2026, <http://smartdefine.org/cap/definitions/1149332>. |
| MLA | Barry Goldsmith. "cap" 21 October 2010. Web. 22 September 2026. <http://smartdefine.org/cap/definitions/1149332> |