The writer of a payer swaption has: the right to enter a swap in the future as t
ID: 2790201 • Letter: T
Question
The writer of a payer swaption has:
the right to enter a swap in the future as the floating-rate payer.
the right to enter a swap in the future as the fixed-rate payer.
an obligation to enter a swap in the future as the floating-rate payer.
an obligation to enter a swap in the future as the fixed-rate payer.
A.the right to enter a swap in the future as the floating-rate payer.
B.the right to enter a swap in the future as the fixed-rate payer.
C.an obligation to enter a swap in the future as the floating-rate payer.
D.an obligation to enter a swap in the future as the fixed-rate payer.
Explanation / Answer
In a payer swaption, the purchaser has the right, but not the obligation, to enter into a swap contract where he becomes the fixed-rate payer and the floating-rate receiver.
Therefore answer is B.
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