Bank One Corporation - Page 98

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               Other common forms of financial derivatives during the                 
          relevant years included:  (1) Interest rate guarantees such as              
          caps, floors, and collars; (2) interest rate options;                       
          (3) swaptions; and (4) forward rate agreements (FRAs).4  Interest           
          rate caps, floors, and collars are contracts with notional                  
          principal amounts but not necessarily with periodic payments.               
          Interest rate caps and floors require the seller, in exchange for           
          a fee, to make a payment to the purchaser only if, in the case of           
          a cap, a specified market interest rate exceeds the fixed cap               
          rate on specified future dates or, in the case of a floor, the              
          specified market interest rate falls below the fixed floor rate             
          on specified future dates.5  Interest rate options are contracts            
          that grant one party, for a premium payment, the right to either            
          purchase from or sell to the other party a financial instrument             
          at a specified price within a specified period of time or on a              
          specified date.  Swaptions are options to purchase a swap in the            
          future.  FRAs are contracts with notional principal amounts that            
          settle in cash at a specified future date on the basis of the               
          difference between a fixed interest rate and a specified market             





          4 During the relevant years, FNBC was a party to swaps as                   
          well as to one or more of these financial derivatives.                      
          5 An interest rate collar is essentially an interest rate                   
          cap combined with an interest rate floor.                                   





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Last modified: May 25, 2011