8.2.142.1 Definition

The Binary Rate input is used for modeling Binary Interest Rate Caps and Floors. For Binary Interest Rate Cap, when the underlying rate goes above Rate_Cap_Life, Interest Cash Flow is calculated using a given Binary Rate.

For Binary Interest rate Floor, when the underlying rate goes below Rate_Floor_Life, Interest Cash Flow is calculated using a given Binary Rate.

No Cash Flows are exchanged if the underlying rate is below Rate_Cap_life for Binary Interest Rate Cap. Similarly, no Cash Flows are exchanged if the underlying rate is above Rate_Floor_life for the Binary Interest Rate Floor.