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OTC derivatives and hybrid securities
INTRODUCTION
This chapter offers a brief overview of the vast range of innovative OTC derivatives and hybrid securities. It provides an idea of the investment alternatives at clients’ disposal. Some are traded in large volumes and are relatively simple to price using standard models, whilst others are extremely complex. Due to their number and nature, only a brief description is given.
OTC DERIVATIVES
Caps, floors and collars
Caps, floors and collars are OTC interest rate derivatives that offer a buyer a right, but not the obligation to secure the lending/borrowing rate. Unlike option contracts that have a single expiry date, they have periodic resets until maturity. ...
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