What is a Treasury Lock?
A customized rate agreement used by investors to describe the price of a treasury security. The treasury lock guarantees a fixed return. Thus, it acts as a separate security in addition to the treasury security. Treasury locks are settled by cash and the difference between the market value and the cash-settled amount is paid depending on the over-valuation or undervaluation of the treasury lock. A treasury lock cannot only be consummated by agreeing parties.
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