Interest rate cover: via CAP
An interest-rate CAP is an interest-rate derivatives operation by which a company buys the right to compensation from Caja Navarra for future rises in interest rates –normally Euribor- over a predefined level (strike). This allows it to set a “cap” on its financing over the period of the contract. The payment of the premium involves the customer acquiring a right, but no obligation.
The cost of a CAP (premium) depends on:
- Interest rates
- Period of coverage
- CAP strike price
- Volatility of interest rates, etc.
The commercial contracts which cater for operations of this kind are:
- The “Contrato Marco de Operaciones Financieras” (CMOF – Framework Contract for Financial Operations) of the Asociación Española de Banca (AEB – Spanish Banking Association) signed by both parties,
- Confirmation of the operation sent to the customer by Caja Navarra.
The Caja Navarra business office can provide you with full information and advice on how to contract these operations.
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