# Interest Rate Cap and Floor

*Derivatives & Options — Finicade finance glossary*

A cap pays out when a floating rate rises above a set level, a floor when it falls below one — insurance on borrowing or lending costs. Each is really a string of options on the interest rate, one per period.

**Also known as:** cap-floor, caps-and-swaptions, caps-and-leverage, interest rate cap, interest rate floor

**Related terms:** [Swaption](https://finicade.com/glossary/swaption), [Option](https://finicade.com/glossary/option), [Interest Rate](https://finicade.com/glossary/interest-rate)

**Taught in:** Hull Street — Options on Futures & Black's Model

Source: https://finicade.com/glossary/cap-and-floor