An exotic financial derivative instrument that helps the holder hedge the risk of incurring losses due to an increase in the interest rate. The option allows the holder to pay an amount based on a fixed rate of interest specified in the option but receive a larger payment based on the higher prevailing rate of interest. This could be used by a person who has taken a loan on a floating rate of interest to limit the highest rate of interest for which payments would have to be made, while enjoying lower rates of interest.
Related information about interest rate call option:
- Interest Rate Call Option Definition | Investopedia
... payment based on a fixed interest rate. If the option is exercised, the investor who sells the interest rate call option will make a net payment to the option holder .
- What is interest rate call option? definition and meaning
Definition of interest rate call option: An exotic financial derivative instrument that helps the holder hedge the risk of incurring losses due to an increase in the ...
- Interest Rate Call Option: Definition from Answers.com
Interest Rate Call Option An interest rate derivative in which the holder has the right to receive an interest payment based on a variable interest.
- TNxx-xx: Characteristics of Interest Rate Options
interest rate call option as an option that grants the holder the right to make a fixed or known interest payment and receive a variable or unknown interest ...
- ANSWERS TO END OF CHAPTER QUESTIONS QUESTIONS
Thus, when interest rates decline, the value of an interest rate call option will rise. A put option, however, has a delta that is negative. Thus the modified duration ...
- CALL OPTION DEFINITION Some Olympia Credit Union Mortgages ...
CALL OPTION DEFINITION. Some Olympia Credit Union Mortgages or consumer loans may have an interest rate call option. This date means Olympia Credit ...
- What Is an Interest Rate Option? | eHow.com
When someone buys an interest rate call option, they are buying the right to buy the option at a set price. Therefore, if someone buys a call option, he will profit if ...
- What Are Interest Rate Options?
... rates will increase steadily over a specified period of time, he or she may choose to go with an interest rate call option that involves a long-term investment.