Fixed Income Derivatives

Fixed-income securities are investments that provide a regular return. Bonds issued by governments, corporations and banks are examples of this type of security. A fixed-income derivative is a contract whose value derives from the value of a fixed-income security. For instance, a bond future is a derivative priced in accordance with the anticipated price of an underlying bond or bond index. There are two basic types of fixed-income derivatives. The first type, interest-rate derivatives, is based on the direction of interest rates. The second type, credit derivatives, is based on credit risk, or the probability of a bond issuer defaulting on an obligation.

Interest Rate Swaps

Bond Futures Contract

Credit Default Swaps (CDs)

Bond and Bond Futures Options