interest rate option

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Interest Rate Option

An option contract giving the holder to buy (for a call) or sell (for a put) a security with a certain interest rate at a given strike price on or before the expiration date. An interest-rate option is useful to hedge the interest rate risk inherent to portfolios consisting mainly of bonds.

interest rate option

An option contract on interest-bearing securities or on a futures contract on interest-bearing securities. These options are generally used as a means to manage the risk of a bond portfolio.
References in periodicals archive ?
Derman, along with Fischer Black and Bill Toy, developed the Black-Derman-Toy interest-rate options model in 1987.
The joint venture, which began trading on 4 January 1999 under the name of "Euro Brokers Finacor Limited," combines the existing interest-rate options, Dollar deposit and Euro, Sterling, Dollar and Yen swaps operations of Euro Brokers in London with the Euro and Scandinavian swaps businesses of Finacor in London and the Euro swaps business of Finacor in Paris.
The new venture, to be called "Euro Brokers Finacor Limited," will combine the existing interest-rate options, Dollar deposit and Euro, Sterling, Dollar and Yen swaps operations of Euro Brokers International Limited in London with the Euro and Scandinavian swaps businesses of Finacor Limited in London and the Euro swaps business of Finacor Peter in Paris.