BibTeX
@MISC{Kuprianov_over-the-counterinterest,
author = {Anatoli Kuprianov},
title = {Over-the-Counter Interest Rate Derivatives},
year = {}
}
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Abstract
Over-the-counter (OTC) interest rate derivatives include instruments such as forward rate agreements (FRAs), interest rate swaps, caps, floors, and collars. Broadly defined, a derivative instrument is a formal agreement between two parties specifying the exchange of cash payments based on changes in the price of a specified underlying item or differences in the returns to different securities. Like exchange-traded interest rate derivatives such as interest rate futures and futures options, OTC interest rate derivatives set terms for the exchange of cash payments based on changes in market interest rates. An FRA is a forward contract that sets terms for the exchange of cash payments based on changes in the London Interbank Offered Rate (LIBOR); interest rate swaps provide for the exchange of payments based on differences between two different interest rates; and interest rate caps, floors, and collars are option-like agreements that require one party to make payments to the other when a stipulated interest rate, most often a specified maturity of LIBOR, moves outside of some predetermined range. The over-the-counter market differs from futures markets in a number of important respects. Whereas futures and futures options are standardized
Keyphrases
over-the-counter interest rate derivative cash payment future option interest rate swap exchange-traded interest rate derivative forward contract important respect interest rate cap whereas future specified underlying item over-the-counter market differs predetermined range future market option-like agreement specified maturity derivative instrument different interest rate interest rate future otc interest rate derivative different security forward rate agreement formal agreement market interest rate london interbank offered rate interest rate derivative stipulated interest rate
