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Derivatives




Amortizing Option


An option whose underlying asset is an interest rate (hence called: an interest rate option) or an interest rate swap (therefore called: interest rate swaption). In either case, the notional amount (the amount on which the interest payment is calculated) gradually declines with the passage of time. At maturity date, the entire amount of the principal would be paid out, while the option expires.

Amortization implies repayments of principal on an underlying asset.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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