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Interest rate option
An interest rate option gives a buyer the time-limited right to take delivery of an interest rate product at a pre-set rate in the future, in exchange for a premium. Common types include: swaptions, which give the holder the right to enter an interest rate swap; caps and floors, where the buyer receives payments when the rate is above or below the pre-set strike price; and bond options, which give the holder the right to buy or sell a physical bond.
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