It also helps to mark out the pricing formulas of call option in terms of zero - coupon bond and interest - rate caps.

It argues that the lifting of restraints, such as interest-rate caps on deposits or rules that prevent banks from operating in certain markets, leads to more intense competition.

These companies say that lower rate caps would discourage lending to anyone but the most reliable borrowers, driving the rest towards loan sharks who charge truly exorbitant interest rates.