Purchasing a succession of call options on interest rates is called a
A)open interest.
B)pull-to-par.
C)cap.
D)floor.

Question

Quizplus · Accepted Answer

Purchasing a succession of call options on interest rates is called a cap, which is a type of interest rate derivative used to protect against interest rate increases. A cap sets a limit on the maximum interest rate that the holder will pay, while allowing the holder to benefit from any potential interest rate decreases. Open interest refers to the total number of outstanding futures contracts, pull-to-par is a term used in bond pricing, and a floor is a type of interest rate derivative used to protect against interest rate decreases.

Purchasing a Succession of Call Options on Interest Rates Is