Ratchet caps

A ratchet cap is one where the strike price increases when interest rates rise. Unlike a step-up cap, however, this is not according to a preordained schedule. Instead, as each caplet expires, the strike price of all the remaining caplets is reset to the greater of ... 

For example, suppose the ratchet cap initially had a strike rate of 3%, and a spread of 50 bp. So long as EURIBOR stayed below 3%, the caplets would expire out-of-the-money, and the strike rate would remain at 3%. The first time that EURIBOR sets above 3%, however, the expiring caplet would result in a payment to the owner of the cap, but the strike rates for all the remaining caplets would be reset to 3.5%. The cap would therefore not pay out again until rates rose to this higher level, whereupon the strike rate would be ratcheted up to 4%, and so on. 

A ratchet cap therefore provides protection against rapid rises in interest rates, rather than interest rates exceeding a particular level. 

In the final NAP, all installation-level allocations were ratcheted down to reflect one or more additional factors, depending on the sector. The allocations to all sites, including incumbents and new entrants, were reduced by 0.7% to ensure that sufficient allowances are available to provide for the level of new combined heat-and-power (CHP) installations called for by government CHP targets. In addition, incumbent sites whose allocations were determined by the new entrants benchmarks (because of lack of emissions data) had their allocations reduced by an amount equal to the new entrants reserve percentage that had been deducted from other incumbents in their sector. Finally, all bench-marked allocations in the power sector - including both recent incumbents and new entrants - were reduced by the adjustment factor of around 14% that is applied to the power sector to meet the overall allowance cap. 

Loss of torque against time has been well documented with plastic caps on plastic bottles. This does not necessarily mean that the closure becomes ineffective, but there are occasions when a low torque only needs the vibration effects of transportation to become an unsatisfactory (loose/leaking) closure. Certain tamper-evident/resistant features such as sealed diaphragms and ratchet-type closure systems are likely to overcome such problems. Having the right combination of plastics may also eliminate or reduce this loss of torque. However, there is the converse where the use of the incorrect combination of plastics, or plastics with undesirable constituents such as lubricants, mould release agents, internal release agents, may actually exacerbate the loss of closure torque. This loss may be associated with thread forms, area of thread contacts, cold flow or creep of plastics involved, lubricants, etc. 

A typical example where this springiness is used are the fuel tank filler caps of many motor cars. Plastic blades form a type of spring ratchet that will prevent the overtightening of the cap. The ratchets are relaxed, except while the cap is screwed onto the filler opening. 

The Elvex Tectra has an advanced polypropylene design and low profile safety cap with a comfortable head-hugging suspension, as well as an access slot. Available in 4 or 6, pin-lock or ratchet suspension and a variety of colors, the Tectra meets the ANSI Z89.1.2009 standard. Elvex, (800) 888-6582, www.elvex.com. Circle 287... 

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