Abstract
Interest rate options and related option-type products are used by market participants to control interest rate risk. There are exchange-traded and over-the-counter interest rate options. The interest rate options product most traded on exchanges is a futures option. Over-the-counter options include options on specific securities, spread options, compound options, caps, and floors. With all over-the-counter products there is counterparty risk faced by the buyer of the option or option-related product. Keywords: option; American option; European option; Bermudan option; exotic options; nonstandard options; exchange-traded options; over-the-counter options; dealer options, futures options; counterparty risk; spread options; compound option; split-fee option; front fee; back fee; cap; floor; caplets; captions; flotions
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