Task: Class Definition Understanding (ontology: Business_Finance/Financial_Industry_Business_Ontology)

Which of the following definitions best describes 'interest rate cap option'?

A. option whose final exercise depends upon the path taken by the price of an underlying instrument, i.e., whose payoff depends on whether or not the underlying asset has reached or exceeded a predetermined price
B. interest rate derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price
C. interest rate derivative in which the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price
D. exotic option that is a series of at-the-money (ATM) options, either puts or calls, where each successive option becomes active when the previous one expires

Answer: interest rate derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price