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elearning > Swaptions

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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

Swaptions menuSwaptions how they workSwaptions exercise

Swaptions into swapSwaptions useSwaptions mortgage hedging

  • 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

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