Interest rate option
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
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.