Pandemonium

  Bond or Debt obligations with coupon payments that are floating in nature are referred to as floating rate bonds. Issuers of these bonds are no different from those for fixed rate bonds i.e. government, government sponsored enterprises, private financial institutions, corporates et al. Bank Loans that are priced on a variable benchmark are also of the nature of floating rate debt. A floating rate coupon typically references a known market benchmark index and has a spread component (quoted in basis points) i.e. sum of the benchmark index yield and spread form the floating rate coupon. In case of the US treasury floating rate note – product introduced in 2013 - the reference benchmark is the 13-week treasury bill yield – while for floating interest payments on US corporate bonds reference the treasury bond itself along with a credit spread. The spread typically determined at the new issuance/initial auction, stays constant through the re-issuance of the bond.      ...

  Interest rate options are key a tool in financial markets because they offer cost effective and nuanced strategies to manage interest rate volatility and related risks. Among these options, swaptions—options on interest rate swaps—stand out for their wider applicability (this product is more liquid than others in the suite) and popularity.   Interest rate swaptions provide the holder with the right, but not the obligation, to enter into an interest rate swap agreement as either the receiver or payer of fixed rates at a predetermined strike price upon the option's expiry. The more widely traded rate options are European style, meaning they can only be exercised at the end of the option period.  Understanding swaptions   Interest rate swaption sallow market participants to hedge interest rate exposures or speculate on future interest rate movements. They are broadly categorised into two types: receiver swaptions and payer swaptions, each serving different hedgi...