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The cap consists of three caplet options with maturities of

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Reference no: EM13569034

An interest rate cap runs for 12 months based on three-month Libor with a strike price of 4%. Which of the following is generally true?

A. The cap consists of three caplet options with maturities of three months, the first one starting today based on three-month LIBOR set in advance and paid in arrears.

B. The cap consists of four caplets starting today, based on LIBOR set in advance and paid in arrears.

C. The implied volatility of each caplet will be identical no matter how the yield curve moves.

D. Rate caps have only a single option based on the maturity of the structure.

Reference no: EM13569034

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