We use the current periodic LIBOR rate to calculate the interest due in the forward contracts, but we use the previous periodic LIBOR rate but multiply by the number of days in current period to calculate the payoff interest rate cap and interest rate floor.
Also, interest rate cap and interest rate floor have one less payment (the first periodic payment) than the forward contract does.
Is my understanding correct?
Also, interest rate cap and interest rate floor have one less payment (the first periodic payment) than the forward contract does.
Is my understanding correct?