An option whose underlying is any point of a yield curve that is located between two specified points on that yield curve. For example, consider a yield curve where an exercise is at 150 basis points on the spread between the yields on two instruments with different maturities (say 4-year and 10-year notes). The yield curve option allows holders to take a view on a yield curve without having to take a view about the overall market direction.
January 20, 2023
