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.
Derivatives
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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