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Derivatives

  Derivatives   |   Terms
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  • April 2, 2023
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Short-Term Interest Rate Option

An interest rate option in which the underlying is the three-month floating interest rate such as LIBOR , EURIBOR, etc. Typically, the underlying rate may relate to short-term financial instruments, such as bank deposits, commercial paper (CP), T-bills, and certificates of deposit (CDs). The most common types of short-term interest rate options are caps, floors and collars on short term rates.

This option is known for short as STIR option.


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