interest rate option


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.