PPT Slide
Restriction on the maximum coupon rate-cap.
The bondholder effectively sold an option to the bond issuer;
coupon rate taken to be min (rfloat, rcap).
Minimum coupon rate specified for a floating rate security-floor.
The bond issuer sold an option to the bond holder;
coupon rate taken to be max (rfloat, rfloor).
Cap and floor provisions are embedded options in fixed income