It's analogous to the difference between an option (which incurs an initial cost--aka, premium--and might be purchased for insurance) and a forward (which has no initial cost due the symmetrical payoff; and might be used to hedge): the FRA can produce a positive or negative payoff = t*notional*(rate - K), where K is the fixed "strike" rate. The caplet, as an interest rate option, produces a non-zero payoff = t*notional*MAX(rate-K); the cap is a sequent of caplets, so would be analogous to a series of FRA (and a series/portfolio of FRAs is effectively an interest rate swap). Thanks,
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