Chatham Rate Cap Calculator - Free Online Tool
Calculation Results
Option Cost (bps):-
Dollar Amount:-
Percentage of Principal:-
Cost Composition Analysis
Time Value-
Intrinsic Value-
Volatility Premium-
Professional rate cap calculator for floating loans, accurately pricing hedging costs with premium breakdown (bps/$)
What is Chatham Rate Cap?
Chatham Rate Cap is a financial derivative product that provides protection against rising interest rates by setting a maximum interest rate level (cap rate) for borrowers. It consists of a series of interest rate options (caplets) that compensate the holder when reference rates exceed the agreed cap rate.
How Chatham Rate Cap Works
- Protection Mechanism: Pays the difference when reference rates (e.g., SOFR, LIBOR) exceed the cap rate
- Pricing Model: Uses Black model or advanced interest rate models to calculate premium
- Settlement: Typically cash-settled at periodic intervals (quarterly/semi-annually)
- Components: Includes notional amount, cap rate, term, and reference rate
How to Use Chatham Rate Cap
- Access Tool: Through Chatham Financial’s proprietary platform
- Input Parameters:
- Notional amount
- Term (1-10 years)
- Reference rate curve
- Volatility assumptions
- Calculate Costs: Obtain premium quotes in bps or dollar terms
- Execute Hedge: Confirm terms with counterparty
Who Can Use This Tool?
- Corporate treasurers managing floating-rate debt
- Commercial real estate borrowers
- Institutional investors hedging rate exposure
- Financial advisors structuring client solutions
Frequently Asked Questions
Q: What’s the minimum notional amount?
A: Typically $1M+ for standard caps
Q: How are payments calculated?
A: (Max[0, Reference Rate - Cap Rate] × Notional × Day Count)
Q: Can caps be canceled?
A: Generally irrevocable once executed