Interest option - Cap/Floor
Interest option is an interest rate hedging product designed to minimize interest rate risk. The buyer of an interest rate option Cap/Floor is protected against an increase/decrease in a defined interest rate (e.g., 3M EURIBOR) for a chosen period. It is a form of insurance against the movement of the interest rate above/below a predefined level for a predefined period, for which the buyer of the interest rate option pays an option premium either as a lump sum at the beginning of the transaction or periodically during its term. By combining interest rate options, a client can create various option strategies, such as a COLLAR, which is a combination of a sold Floor option and a purchased Cap option by the client. The transaction is concluded by phone with subsequent written confirmation.
More precise financial flow planning
Hedging against interest rate increases
Flexibility in setting IRS parameters maximizes risk elimination
Product independent of the loan and separately tradable
The product is intended for clients who:
- need to hedge their loan against rising interest rates
Conditions for concluding a transaction
- signed Request for trading with the Bank
- minimum nominal amount of 1 000 000 EUR (or equivalent in another currency)
- current account maintained in the currency of the option premium
- coverage on the current account for the payment of the option premium
- collateral and approved trading limit (in the case of periodically paid option premium or in the case of a sold option by the client)
- trade currency: EUR / USD / GBP / CHF / CZK / PLN
- trade agreement time: 8:30 AM – 4:00 PM
- LEI code and EMIR i
https://www.tatrabanka.sk/en/business/financial-markets/interest-option-cap-floor/