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Step-Up Cap
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A cap structure, typically embedded in a floating rate note, that limits an interest coupon increase to a certain amount (called the jump) at each reset date. For example, a note with a step-up cap may pay 5.0% at first. With a twenty- five basis point jump, subsequent rates will be set at the lower of (1) the reference index rate plus the agreed spread; or, (2) the previous period's rate plus 0.25%. Also called Periodic Cap. See also Jump, Lookback Step-Up Cap, Ladder Cap.
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