What financial product provides a guarantee against default on certain debt securities?

The correct answer is the financial product that offers protection against the risk of default on certain debt instruments, which is a credit default swap. A credit default swap is a financial derivative that allows an investor to "swap" or transfer the credit risk of a borrower to another party. Essentially, the buyer of a credit default swap pays a periodic premium to the seller, who in turn agrees to compensate the buyer in case of default or other credit events related to the underlying debt security. This mechanism provides assurance to the buyer that they will not suffer a total loss if the issuer of a bond or other debt security fails to meet its obligations.

In the context of fixed-income investing, understanding the usefulness of credit default swaps is crucial. They are often employed by investors to hedge against the risk of default or to speculate on changes in credit risk.

This choice stands out as it directly addresses the issue of default risk protection specifically related to debt securities, which is not the focus of the other options. Each of those alternatives serves different functions; for instance, interest rate caps and floors are designed to manage interest rate exposure, while currency swaps facilitate exchanging cash flows denominated in different currencies.