the volatility risk with an investment

“Interest Rate Caps and Floors” Please respond to the following:

  • Assess the volatility risk with an investment in a derivative, using  an interest rate cap or floor in today’s marketplace. Indicate whether  or not you would advise financial institutions to engage in this type of  investment. Provide support for your response.
  • Assess the effectiveness of using the Black-Scholes model to  value cap and floor type investments, indicating how any pitfalls with  this method of valuation can be minimized. Provide support for your  response.
  • Please  provide one citation/reference for your initial posting that is not  your textbook.  Please do not use Investopedia or Wikipedia.