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   Contingent Cap
   















 

C

Contingent Cap

An interest rate cap contract for which the buyer of the cap pays no up-front premium but agrees to pay a predetermined premium if the cap has any value on its effective date. The premium for a contingent cap will be much greater than the premium on an ordinary cap but the premium will be paid only if the cap is in the money at expiration. See Contingent Premium Option (diagram).

Glossary * C