Putable swap swap payer swaption y fixed receiver has

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Putable swap = swap + payer swaption y Fixed receiver has the option to cancel. y He is long the swap and long the option to cancel. y The option to cancel is a payer swaption. Callable swap = swap - receiver swaption y Fixed payer has the option to cancel. y Fixed payer's option to cancel is a receiver swaption. Example: Callable Swap Consider a 5.5% 2-year callable swap, i.e. the swap is cancelable at the fixed payer's option. y The fixed payer is short the swap and long a call swaption. y The time 0 value of the fixed payer’s position is - - swap + swaption = -0.0019 + 0.5003 = 0.4984. - The time 0 value of the party who is long the swap, the fixed receiver, is - swap – swaption = 0.0019 -0.5003 =-0.4984
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