DEFINITION of 'Bermuda Swaption'
A derivative financial instrument that gives the holder the right, but not the obligation, to enter into an interest rate swap on any one of a number of predetermined dates. The holder may only exercise the option on one of these dates. By contrast, a plain vanilla swaption would give the holder the option to enter into an interest rate swap on the expiration date of the derivative.
BREAKING DOWN 'Bermuda Swaption'
Swaptions are one of four basic methods for exiting a swap before its termination date. The swaption basically allows the investor to offset the swap he or she wishes to exit. Bermuda swaptions function in a similar manner to Bermuda options which can only be exercised on predetermined dates and thus have to often be valued using Monte Carlo Simulation rather than other, more common, option pricing models.

Swaption (Swap Option)
The option to enter into an interest rate swap. In exchange for ... 
Put Swaption
An option on an interest rate swap that gives the option buyer ... 
Call Swaption
A type of option between two parties that can be exercised on ... 
Reversible Swap
An exchange of cash flows that allows one counterparty to use ... 
Bermuda Option
A type of exotic option that can be exercised only on predetermined ... 
Plain Vanilla
The most basic or standard version of a financial instrument, ...

Trading
4 Equity Derivatives And How They Work
Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself. 
Investing
Derivatives 101
Learn how to use this type of investment as an alternative way to participate in the market. 
Markets
How Two Harbors' Derivatives Work?
Mortgage REITs, like Two Harbors , have cut their dividend payments as interest rate trends have eaten into profitability under the business models. 
Trading
5 Equity Derivatives And How They Work
These derivatives allow investors to transfer risk, but there are many choices and factors that investors must weigh before buying in. 
Trading
Currency Swap Basics
Find out what makes currency swaps unique and slightly more complicated than other types of swaps. 
Markets
What's an Interest Rate Swap?
An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount. 
Markets
What Does Plain Vanilla Mean?
Plain vanilla is a term used in investing to describe the most basic types of financial instruments. 
Managing Wealth
How To Read Interest Rate Swap Quotes
Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes 
Trading
Managing Interest Rate Risk
Learn which tools you need to manage the risk that comes with changing rates. 
Investing
Different Types of Swaps
Investopedia explores the most common types of swap contracts.

What is a Bermuda swaption?
The Bermuda swaption refers to a modified American style of option. A swaption is an option on an interest rate swap in which ... Read Answer >> 
What is an overthecounter derivative?
Learn more about overthecounter derivatives and how they work with an example of a derivative tradeoff exchange. Read Answer >> 
What is the difference between derivatives and swaps?
Find out more about derivative securities, swaps, examples of derivatives and swaps, and the main difference between derivative ... Read Answer >> 
What is the difference between derivatives and options?
Learn how options are one type of derivative and how equity options derive their value from a stock, and understand other ... Read Answer >> 
Can bond traders trade on interest rate swaps?
Read about interest rate swaps and why these transactions are performed by institutional actors in the bond market, not individual ... Read Answer >> 
Do interest rate swaps trade on the open market?
Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >>