In order to hedge against rising interest rates a bank would buy a call option on Eurodollar futures.

Question

Quizplus · Accepted Answer

To hedge against rising interest rates, a bank would more likely buy a put option on Eurodollar futures, as this would allow the bank to sell Eurodollar futures at a predetermined price, protecting against the fall in prices that typically accompanies rising interest rates. A call option would be beneficial in a scenario where the bank expects interest rates to fall, not rise.

In Order to Hedge Against Rising Interest Rates a Bank