elearning > Swaptions

  

Learn about the following:

How a payer's swaption works. How a receiver's swaption works. Cash and physical settlement. Two simple uses for swaptions.

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Course Summary

• 25 minutes
• 6 question multiple choice test
• How a payer's swaption works
• How receiver's swaption works
• Cash and physical settlement
• Two simple uses for swaptions

Swaptions - the details

1. How swaptions work

• Payer’s swaptions
• Buyer and seller
• Premium
• Exercise
• Receiver’s swaptions
• Buyer and seller
• Premium
• Exercise
• Cash and physical settlement
• Risks for buyer and seller

2. How swaptions can be used

• Extendable loans, example
• Long and short option positions
• Hedging the risk
• Exercise or repayment
• Mortgages fixed/variable customer’s choice
• Why the bank is short a swaption
• How the bank can hedge the risk (Bermudan swaption)

3. Summary

4. Test