What are interest rate derivatives?

What are interest rate derivatives?

Interest rate derivatives are financial instruments whose value is derived from changes in interest rates or interest-bearing assets. These derivatives can include various contracts such as futures, options, swaps, swaptions, and Forward Rate Agreements (FRAs). They are commonly used by institutional investors, banks, corporations, and individuals to manage and hedge against risks associated with fluctuations in market interest rates. Additionally, interest rate derivatives can amplify or refine the holder's risk exposure or speculate on interest rate movements.

This versatile financial tool plays a crucial role in managing interest rate risk in various financial market sectors.



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