Interest Rate Derivatives are financial instruments whose value is determined by the future movement of interest rates. These derivatives, such as swaps, futures, and options, are utilized by market participants to hedge against interest rate risk or to speculate on future rate changes. They provide exposure to interest rate fluctuations without direct ownership of debt.
Context
Decentralized finance (DeFi) platforms are giving rise to new forms of interest rate derivatives within crypto markets. These instruments permit users to speculate on or hedge against changes in variable lending rates on blockchain protocols. The interaction between traditional and decentralized interest rate markets is a developing area of financial analysis.
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