Purchasing a succession of call options on interest rates is called a
A)open interest.
B)pull-to-par.
C)cap.
D)floor.
E)collar.

Question

Quizplus · Accepted Answer

Purchasing a succession of call options on interest rates is a strategy called a cap. A cap is used to limit the increase in interest rates, and the purchase of call options allows the buyer to benefit from rising interest rates while protecting them from potential losses. The other choices (open interest, pull-to-par, floor, collar) are not related to this specific strategy.

Purchasing a Succession of Call Options on Interest Rates Is