Swaps are typically quoted in two ways: as a spread (swap spread) and as an all-in rate: Spread: a swap...
Swap tenor is the average length of a swap. Normally, the farther the tenor of a swap, the riskier it...
A standard power option has a nonlinear payoff at maturity. The payoff of a call (power call option) is: Power...
A hedge ratio that is constructed when interest rate futures contracts are used to hedge positions in an interest-dependent asset...
Essentially, a floor is a strip of put options on forward interest rates. Therefore, a floorlet is a put option...
A multi-asset option is one whose payout depends on the overall performance of more than one underlying asset. In addition...
An option is a derivative contract giving the holder (buyer) the right, without the obligation, to trade (buy or sell)...
Firms could use swaps to transform a floating-rate rate loan to a fixed-rate loan. For example, a firm has arranged...
A long cap is a cap held by the purchaser (the long) against payment of the cap premium to the...
In essence, a position in the underlying stock has zero gamma and cannot be used to adjust the gamma of...