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Derivatives

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  • November 2, 2021
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Yield-Curve Option

An option whose underlying is any point of a yield curve that is located between two specified points on that yield curve. For example, consider a yield curve where an exercise is at 150 basis points on the spread between the yields on two instruments with different maturities (say 4-year and 10-year notes). The yield curve option allows holders to take a view on a yield curve without having to take a view about the overall market direction.


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