An interest rate future is a future contract with an underlying instrument that pays interest; a contract between the buyer and seller agreeing to the future delivery of any interest-bearing asset. The interest rate future allows the buyer and seller to lock in the price of the interest-bearing asset for a future date. To differentiate from other fixed-income futures such as a bond future, the underlying assets for an interest rate future must be a particular interest rate. An interest rate future is actively used to hedge against future interest rate movement, i.e., so-called interest rate market risk.
Due to the varying features of the underlying interest rates, the way to calculate the price and quote the interest rate future varies.
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