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  • May 2005 (Revised February 2006)
  • Background Note
  • HBS Case Collection

Introduction to Interest Rate Options

  • Format:Print
  • | Pages:11
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Abstract

Introduces interest rate derivatives, covering floors, caps, and swaptions. Introduces floors, caps, and swaps by analogy to equity puts, calls, and stocks. As with calls and puts on equity, a put-call parity relationship is shown to exist between caps, floors, and swaps. Draws on students' knowledge of the put-call parity in an equity context.

Keywords

Interest Rates

Citation

Chacko, George C., and Anders Sjoman. "Introduction to Interest Rate Options." Harvard Business School Background Note 205-112, May 2005. (Revised February 2006.)
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More from the Author
  • The Price of Immediacy By: George Chacko, Jakub W. Jurek and Erik Stafford
  • Pricing Liquidity: The Quantity Structure of Immediacy Prices By: George Chacko, Jakub W. Jurek and Erik Stafford
  • Ticonderoga: Inverse Floating Rate Bond 
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