Interest Rate Call Option
Interest rate call options can be used by an investor wishing to hedge a position in a loan in which interest is paid based on a floating interest rate. By purchasing the interest rate call option, an investor is able to forecast the cash flow that will be paid when the interest payment is due.
Interest rate call options can be used in either a periodic or balloon payment situation.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
Interest rate cap and floor — Interest rate c An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price. An example of a cap would be an agreement to receive a payment for… … Wikipedia
Call option — This article is about financial options. For call options in general, see Option (law). A call option, often simply labeled a call , is a financial contract between two parties, the buyer and the seller of this type of option. The buyer of the … Wikipedia
Interest rate — Finance Financial markets Bond market … Wikipedia
Conditional Call Option — A provision that requires the issuer of a callable bond to replace the bond with a non callable bond of similar maturity and interest rate in the case that the security is called before maturity is reached. Conditional call options usually only… … Investment dictionary
option — op·tion 1 / äp shən/ n 1: the power or right to choose; also: a choice made or available 2: a privilege of demanding fulfillment of a contract on any day within a specified time 3: a contract conveying in exchange for the payment of a premium a… … Law dictionary
option-adjusted spread — ( OAS) (1) A measurement of the return provided to an investor from a financial instrument that is either an option or that includes an option. The option adjusted spread calculations break up a security into separate cash flows. Each of those… … Financial and business terms
Option (finance) — Stock option redirects here. For the employee incentive, see Employee stock option. Financial markets Public market Exchange Securities Bond market Fixed income … Wikipedia
Option style — In finance, the style or family of an option is a general term denoting the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) … Wikipedia
Option time value — Finance Financial markets Bond market … Wikipedia
Option screener — An option screener is a tool that evaluates options based on criteria and generates a list of potential trading ideas. Most people who trade options are technical traders. It essentially means they look for patterns in charts. Also they use… … Wikipedia