Upfront Premium Cost
$0
One-time payment
Effective Cap Rate
0%
All-in hedged rate
Breakeven Index Rate
0%
Rate where cap pays for itself
Maximum Interest Rate
0%
After cap protection
Total Interest Savings (10yr projection)
$0
vs. unhedged floating rate
Net Hedge Benefit (Savings - Premium)
$0
Total economic value
📅 Interest Rate Projection & Hedge Analysis
📊 Hedge Analysis Breakdown
📌 Interest Rate Cap Hedging Explained:
• Interest Rate Cap: Protects against rising rates above strike; buyer pays premium, receives excess interest
• Strike Rate: The maximum interest rate you'll pay (after cap)
• Premium: Upfront cost, typically 100-300 bps of notional for 3-5 year caps
• Breakeven Rate: Index level where cap payouts equal premium paid
• SOFR vs LIBOR: SOFR is the new standard replacing LIBOR for new hedges
• Collar: Combines a cap (max rate) and a floor (min rate), reduces premium cost
• Data based on Chatham Financial / similar market conventions