- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 32. Valuation of Contingent Claims
- Subject 5. Black Option Valuation Model
CFA Practice Question
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
Correct Answer: B
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 |