A money market derivative is a short-term interest rate derivative used in money market trading and hedging. It allows market participants to hedge against or speculate on forward interest rates.
There are several types of money market derivatives, most of which are over-the-counter derivatives (OTC derivatives)- i.e., they are negotiated between the counterparties and tailor-made to meet their specific requirements which happen to be non-standard and vary from transaction to another. These derivatives principally include:
