An acronym for short-term interest rate option. By definition, it is an interest rate option in which the underlying is the three-month floating interest rate such as LIBOR, EURIBOR, etc. Typically, the underlying rate may relate to short-term financial instruments, such as bank deposits, commercial paper (CP), T-bills, and certificates of deposit (CDs). The most common types of short-term interest rate options are caps, floors and collars on short-term rates.
August 20, 2024
