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Basic Question 7 of 12

A payer swaption is a ______ option on a bond and a receiver swaption is a ______ option on a bond.

A. call; put
B. put; call
C. put; put
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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
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I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt

Martin Rockenfeldt

Learning Outcome Statements

describe how the Black model is used to value European options on futures;

describe how the Black model is used to value European interest rate options and European swaptions;

CFA® 2025 Level II Curriculum, Volume 5, Module 32.