Interest rate option

An Interest rate option is a specific financial derivative contract whose value is based on interest rates. Its value is tied to an underlying interest rate, such as the yield on 10 year treasury notes.

Similar to equity options, there are two types of contracts: calls and puts. A call gives the bearer the right, but not the obligation, to benefit off a rise in interest rates. A put gives the bearer the right, but not the obligation, to profit from a decrease in interest rates.

The exchange of these interest rate derivatives are monitored and facilitated by a central exchange such as those operated by CME Group.

Terms	Credit spread Debit spread Exercise Expiration Moneyness Open interest Pin risk Risk-free interest rate Strike price the Greeks Volatility

Vanilla options	Bond option Call Employee stock option Fixed income FX Option styles Put Warrants

Exotic options	Asian Barrier Basket Binary Chooser Cliquet Commodore Compound Forward start Interest rate Lookback Mountain range Rainbow Swaption

Combinations	Collar Covered call Fence Iron butterfly Iron condor Straddle Strangle Protective put Risk reversal

Spreads	Back Bear Box Bull Butterfly Calendar Diagonal Intermarket Ratio Vertical

Valuation	Binomial Black Black–Scholes model Finite difference Garman-Kohlhagen Margrabe's formula Put–call parity Simulation Real options valuation Trinomial Vanna–Volga pricing

Swaps

Exotic derivatives

Other derivatives

Market issues

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Interest rate option

See also