(Reuters) A surge in hedging to protect against aggressive Federal Reserve tightening has caused liquidity problems in the interest rate options sector, reflecting a trend that has been going on in some parts of the bond market. Strong demand has hoisted volatility on so-called swaptions, or options on interest rate swaps, which give the buyer the right to enter into a contract in the future at a pre-determined price.
Volatility surge causes liquidity strain in rate options market as Fed tightens
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