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Basic Question 7 of 12
A payer swaption is a ______ option on a bond and a receiver swaption is a ______ option on a bond.
B. put; call
C. put; put
A. call; put
B. put; call
C. put; put
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan2 | Remember payer=put receiver=call |
| rhardin | Because bond prices move in opposite direction of interest rates. Tricky! |
| charomano | Payer swaption => payer fixed => if rates goes up, he will be better of borrowing (selling bonds) => put option, the right to sell a bond Receiver swaption => receiver fixed => if rates fall, he will be better of lending money (buying bonds) => call option, the right to buy a bond |
| ABYCAPRI | Thanks charomano |
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu
Learning Outcome Statements
describe how the Black model is used to value European options on futures;
describe how the Black model is used to value European interest rate options and European swaptions;
CFA® 2025 Level II Curriculum, Volume 5, Module 32.