An interest rate cap, a.k.a “cap”, is essentially an insurance policy, purchased by a borrower, that protects them against undesirable movements in a floating interest rate, most commonly 1-month SOFR. Caps have three primary economic terms:

A vanilla interest rate swap is a contract to exchange fixed and floating rate cash flows over time, based on a set principal amount.

Defeasance enables a borrower to refinance or sell their property. Provisions in many Loan Agreements restrict borrowers from paying off their loan early to release them from their mortgage obligations.

Terminating a swap presents the same challenges to a borrower as entering into a swap. Current market dynamics and pricing determine a swap’s termination value.

We provide extensive, unbiased exposure analysis and develop a menu of hedging choices that enable a borrower to make an informed decision based upon their unique goals and objectives.

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