Interest rate caps are purchased to hedge floating-rate loans every business day. Cap pricing is driven by economic factors including the notional hedged, term, strike rate, forward curve, and volatility of the underlying index.

An FX forward curve is a curve that shows FX forward pricing for all the different dates in the future. FX forward pricing is determined by the current exchange rate, the interest rate differentials between the two currencies, and the length of the FX forward.

Banks use back-to-back swaps to meet borrower demand for long-term fixed-rate loans. With back-to-back swaps, the bank enters a floating-rate loan and a fixed-rate swap with the borrower and then a second, offsetting swap with a dealer counterparty.