1: BSM vs Black
Interest rate Options – are options on interest rates that at it’s very basic construct can be described…
2: Embedded Bond Options
Bonds are frequently structured with optionality in them for either the issuer or investor.
3: Interest Rate Cap and Floor
Interest Rate Caps – are a certain type of option on interest rates that cap the exposure to higher rates…
4:Swaptions
Swaptions – are options on interest rate swaps either with a right (but not an obligation) to enter a received or a paid position…
5: Annuity and Convexity
The series of swap cash flows we have discussed so far are of the nature of an annuity…
7: Rate Option Strategies…Conditional Spread
Conditional Spread strategies using rate options now let’s look at option strategies on two different underlying…
2: Bootstrapping of Yield Curves – Par, Zero, Forward
Par curve is the spot interest rate curve for coupon bearing instruments as traded in the market,…
