The interest rate swap is not the only hedging and investing tool in the derivatives arsenal. Investors and issuers can also purchase related derivatives known as interest rate caps, floors, and collars.

These other derivatives provide conditional protection or profit based on moves in interest rates. But because of the conditional nature of the derivatives, the products contain a type of option, which can complicate pricing.

Limited Time Offer

Save $400 off your subscription. Special offer ends April 30, 2017.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.