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Derivatives

  Derivatives   |   Terms
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  • October 24, 2021
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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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