Swaption (Swap Option)


DEFINITION of 'Swaption (Swap Option)'

The option to enter into an interest rate swap. In exchange for an option premium, the buyer gains the right but not the obligation to enter into a specified swap agreement with the issuer on a specified future date.

BREAKING DOWN 'Swaption (Swap Option)'

The agreement will specify whether the buyer of the swaption will be a fixed-rate receiver (like a call option on a bond) or a fixed-rate payer (like a put option on a bond).

  1. Call Swaption

    A type of option between two parties that can be exercised on ...
  2. Reverse Swap

    An exchange of cash flow streams that undoes the effects of an ...
  3. Commodity Swap

    A swap in which exchanged cash flows are dependent on the price ...
  4. Interest Rate Swap

    An agreement between two parties (known as counterparties) where ...
  5. Bermuda Swaption

    A derivative financial instrument that gives the holder the right, ...
  6. Currency Swap

    A swap that involves the exchange of principal and interest in ...
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