ANZ

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    Financial Dictionary

    Dictionary Home The Language of Money - Edna Carew
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    Zero-cost collar

    A type of collar where a borrower arranges with his or her bank to buy a cap and sell a floor (vice versa in the case of an investor) so that the cost of the cap is completely offset by the income received from the floor. The borrower selects either the cap or the floor strike price and the bank calculates the other strike at which a zero cost is achieved.

    See also: collar.

    Important notice