AFM知识点汇总——Interest rate options.

1) The company has the choice not to exercise the option and will therefore be able to take advantage of falling interest rates.

2) These are tailored to the specific needs of the company.

3) Therefore more flexible than exchange traded options for a more exact hedge.

4)Exchange traded options are useful for uncertain transactions-for example you may be unsure if a loan will actually be needed. If it becomes evident that the option is not required it can be sold.

1) The premium cost may be relatively expensive compared with the costs of other.

2) Hedging instruments. It will be payable whatever the movement in interest rates and whether or not the option is exercised.

3) If the company has a collar, this will limit its ability to take advantage of lower interest rates to the lower limit set the cap.

4) The maturity of exchange traded options may be limited to one year.