Rates Derivatives Flashcards
1
Q
What is a derivative
A
a financial security with a value that is derived from an underlying asset or assets
2
Q
Give an example of a derivative
A
European trader buying American stocks
3
Q
What is a rates derivative?
A
Used by traders in order to protect themselves from market interest
4
Q
What types of rate derivative are there?
A
Swaps, caps and floors
5
Q
What is a swap?
A
taking a set amount of interest rather than the actual changing interest
6
Q
what are caps?
A
protection on the top end of interest
7
Q
what are floors?
A
Protects at the bottom end of interest
