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.
INVESTOPEDIA EXPLAINS '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.

Call Swaption
A type of option between two parties that can be exercised on ... 
Reverse Swap
An exchange of cash flow streams that undoes the effects of an ... 
Interest Rate Swap
An agreement between two parties (known as counterparties) where ... 
Exercise
To put into effect the right specified in a contract. In options ... 
Swaption (Swap Option)
The option to enter into an interest rate swap. In exchange for ... 
Bermuda Option
A type of exotic option that can be exercised only on predetermined ...

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A derivative is a type of security in which the price of the security is dependent on underlying assets. A derivative could ... Read Full Answer >> 
What does it mean to be long or short a derivative?
A derivative is a type of security in which the price of the security is dependent on one or more underlying assets. A derivative ... Read Full Answer >> 
What is an overthecounter derivative?
A derivative is a type of security in which the price of the security depends on the price of the underlying asset. Depending ... Read Full Answer >> 
What does the underlying of a derivative refer to?
A derivative security is a financial instrument in which the price of the derivative is dependent on its underlying asset. ... Read Full Answer >> 
What kinds of derivatives are types of contingent claims?
A contingent claim is another term for a derivative with a payout that is dependent on the realization of some uncertain ... Read Full Answer >> 
How can an investor terminate a derivative contract?
Most derivatives contracts have provisions allowing for early termination and netting out the initial investment. The early ... Read Full Answer >>

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