A hedge of interest rate risk with a put option on futures completely offsets gains but only partly offsets losses.

Question

Quizplus · Accepted Answer

A put option on futures gives the holder the right, but not the obligation, to sell the underlying futures contract at a specified price, which can help manage interest rate risk by providing a floor for losses. However, it does not completely offset gains because the holder can still benefit from favorable movements in interest rates by choosing not to exercise the option.

A Hedge of Interest Rate Risk with a Put Option