In this session, Carl showed how (and why) caps & floors affect return, and introduced a recent improvement to PrecisionLender that takes into account forward rate expectations and volatility estimates to more accurately determine the impact of caps & floors.
This new functionality is available to all PrecisionLender clients. Please contact us if you’d like to enable it for your bank.
Why does it matter?
The threat of rising rates is causing many lenders to consider adjustable and floating rate loans a lot more often… some might even offer one to nearly everyone that walks through the door. When you offer one, does your borrower ask for a cap? Does your bank insist on a floor? Can you easily calculate the impact that a cap or floor has on return?
If you’ve thought about these questions, then you owe it to yourself to watch the video in our support center…
Understanding the Impact of Caps and Floors, October 2013