
194 Derivatives and Risk Management
C H A P T E R S U M M A R Y
Interest rate futures are used to hedge interest rate risk.
Interest rate risk is faced by organizations and individuals who
invest in xed income securities as well as by organizations
and individuals who borrow or lend money.
An interest rate futures contract is written on an asset whose
price is dependent only on the level of interest rates.
Interest rate futures are available on notional 10-year 7%
coupon bonds and are traded in the NSE.
e contract is settled in cash during the life of the futures
through marking-to-market, and the