For a given hedging structure (i.e. nominal rate, maturity and exercise rate), cap pricing fluctuates over time based on changes in: In addition, fair value interest rate swaps must meet the following additional criteria: a reverse rate collar is the simultaneous purchase of an interest rate floor and the simultaneous sale of an interest rate ceiling. An interest rate item is a kind of interest rate derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed exercise price. An example of a cap would be an agreement to get a payment per month exceeding the LIBOR rate above 2.5%. Mathematically, a caplet payment on an interest rate taken at K The interest rate ceiling can be analyzed as a series of European call options called « caplets » that exist for each period during which the cap agreement is concluded. As a rule, to exercise a ceiling, its buyer is not required to notify the seller, because the ceiling is exercised automatically when the interest rate exceeds the exercise rate (interest rate).  Note that this auto exercise feature is different from most other types of options. Each caplet is paid in cash at the end of the period to which it relates.  The shortcut method greatly simplifies hedge accounting for interest rate swap contracts. The fair values of the swap arrangements as at December 31, 2016 amounted to $4 million in assets and liabilities of $62 million and are included in the consolidated balance sheet as other long-term assets or other long-term liabilities. The fair value of the swap arrangements as at December 31, 2015, consisting of $11 million in assets and liabilities of $2 million and is included in the consolidated balance sheet in other long-term assets or other long-term liabilities. .