Interest rate option

Short description: Financial derivative contract

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

* Derivative

## References

1. ↑ Antl, Boris. "Management of Interest Rate Risk". http://faculty.london.edu/icooper/assets/documents/ManagementInterestRateRisk(1).pdf.

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Derivatives market

Derivative (finance)

Options|

| Terms|

* Credit spread
* Debit spread
* Exercise
* Expiration
* Moneyness
* Open interest
* Pin risk
* Risk-free interest rate
* Strike price
* the Greeks
* Volatility

|

Vanilla options|

* American
* Bond option
* Call
* Employee stock option
* European
* Fixed income
* FX
* Option styles
* Put
* Warrants

Exotic options|

* Asian
* Barrier
* Basket
* Binary
* Chooser
* Cliquet
* Commodore
* Compound
* Forward start
* Interest rate
* Lookback
* Mountain range
* Rainbow
* Swaption

Combinations|

* Collar
* Covered call
* Fence
* Iron butterfly
* Iron condor
* Straddle
* Strangle
* Protective put
* Risk reversal

Spreads|

* Back
* Bear
* Box
* Bull
* Butterfly
* Calendar
* Diagonal
* Intermarket
* Ratio
* Vertical

Valuation|

* Binomial
* Black
* Black–Scholes model
* Finite difference
* Garman–Kohlhagen
* Margrabe's formula
* Put–call parity
* Simulation
* Real options valuation
* Trinomial
* Vanna–Volga pricing

Swaps|

* Amortising
* Asset
* Basis
* Conditional variance
* Constant maturity
* Correlation
* Credit default
* Currency
* Dividend
* Equity
* Forex
* Forward Rate Agreement
* Inflation
* Interest rate
* Overnight indexed
* Total return
* Variance
* Volatility
* Year-on-Year Inflation-Indexed
* Zero Coupon Inflation-Indexed
* Zero Coupon Swap

* Forwards
* Futures

* Contango
* Currency future
* Dividend future
* Forward market
* Forward price
* Forwards pricing
* Forward rate
* Futures pricing
* Interest rate future
* Margin
* Normal backwardation
* Single-stock futures
* Slippage
* Stock market index future

Exotic derivatives|

* Energy derivative
* Freight derivative
* Inflation derivative
* Property derivative
* Weather derivative

Other derivatives|

* Collateralized debt obligation (CDO)
* Constant proportion portfolio insurance
* Contract for difference
* Credit-linked note (CLN)
* Credit default option
* Credit derivative
* Equity-linked note (ELN)
* Equity derivative
* Foreign exchange derivative
* Fund derivative
* Interest rate derivative
* Mortgage-backed security
* Power reverse dual-currency note (PRDC)

Market issues|

* Consumer debt
* Corporate debt
* Government debt
* Great Recession
* Municipal debt
* Tax policy

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