Interest rate derivatives are financial contracts whose value is derived from the future movements of interest rates. They are commonly used by businesses and investors to manage or hedge against the risk of fluctuating interest rates. Examples include interest rate swaps, options, and futures, which allow parties to exchange cash flows or lock in rates for future borrowing or lending. These instruments can help stabilize cash flows and reduce uncertainty in financial planning. For instance, a company expecting to borrow money may use an interest rate derivative to secure a fixed rate, protecting itself from potential increases in market interest rates.