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Derivatives




Interest Rate Option


A type of interest rate derivative; a contract (an option) which gives the holder the right without the obligation to pay or receive a preset interest rate (called the strike) on a specific notional amount for a specific period of time. The option holder thereby has the right to lock in a future rate today. Like most options, interest rate options come in two basic forms: interest rate calls and interest rate puts.

Interest rate options could also refer to caps or floors.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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