Swaption


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Related to Swaption: Put swaption, Call swaption

Swaption

Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement by some specified date in the future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to the swap if the buyer exercises.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Swaption

An option in which the buyer of the option has the right to enter into to an interest rate swap. The terms of the swaption specify whether the buyer will be the payer of the floating rate or the payer of the fixed rate. It is called a swaption because it is an option on a swap. A swaption is useful if an interest rate swap may be useful for the buyer's investment strategy, but there is still some uncertainty as to whether that will be the case. See also: Call swaption, Put swaption, Plain vanilla swap.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

swaption

An option taken on an interest-rate swap. A swaption buyer has the right to enter into an interest-rate swap agreement by a specified date.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Results show that the KNL with OpenMP evaluates payoff European LIBOR-based swaptions significantly faster (small the computation time), more economically profitable (8) (small the Cost factor) and more energy efficient (11) (small the Dissipation factor) than nearly comparable KNC and HSW.
The implied volatility on swaptions falls by 3 bp, indicating a slight decrease in inflation uncertainty.
Bank of England (2004) "Swaptions and monetary policy stance", Quarterly Bulletin, Spring, p.8
In defining what financial instruments qualify as derivatives, the GASB believed that simply providing a comprehensive list of the types of derivative instruments (i.e., swaps, swaptions, and futures contracts) was insufficient.
(7) Swaptions are options granting their owners the right but not the obligation to enter into an underlying swap.
A swaption would give the holder the right but not the obligation to enter into a swap on specified terms.
Such strategies include purchasing a "swaption," triggered by a rate decline, in which the dealer pays a fixed rate to the insurer and the insurer pays a floating rate.
Ritchken, 2003, "Hedging in the Possible Presence of Unspanned Stochastic Volatility: Evidence from Swaption Markets", Journal of Finance, 58:2219-2248
* Swaption or Swap Option--An agreement under which one party has an option to either enter into or cancel an interest rate swap with the other under specified terms.
In addition, the Company has entered into a $105.0 million notional value of pay-fixed interest rate swaption with a swap term of one year.