Interest rate option
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An interest rate option is a specific financial derivative contract whose value is based on interest rates.[1] Its value is tied to an underlying interest rate, such as the yield on 10 year treasury notes.
Similar to equity options, there are two types of contracts: calls and puts. A call gives the bearer the right, but not the obligation, to benefit off a rise in interest rates. A put gives the bearer the right, but not the obligation, to profit from a decrease in interest rates.
The exchange of these interest rate derivatives are monitored and facilitated by a central exchange such as those operated by CME Group.
See also
[edit]References
[edit]- ^ Antl, Boris. "Management of Interest Rate Risk" (PDF). Retrieved 1 February 2024.
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