swaption

An option to enter into a swap. A payer or put swaption is the option to enter into a pay fixed/receive floating swap. A receiver or call swaption is the option to enter into receive fixed/pay floating swap. American Banker Glossary

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options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement by some specified date in the future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to the swap if the buyer exercises. Bloomberg Financial Dictionary

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swaption swap‧tion [ˈswɒpʆn ǁ ˈswɑːp-] noun [countable]

FINANCE a loan with a variable interest rate (= one that changes) that can be exchanged for a loan with a fixed interest rate if rates fall below a certain level:

• The swaption mortgage will allow borrowers to switch out of fixed rate if the variable rate falls.

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   An option on a swap, giving the holder the right, but not the obligation, to enter into an interest rate swap as either the payer or receiver of the fixed side of the swap.

   ► See also Swap.

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swaption UK US /ˈswɒpʃ^ən/ noun [C] FINANCE

► the right to make a swap on or by a particular date in the future, for example the right to exchange a fixed interest rate for a lower, variable one: »

If the swaption is not exercised by maturity, it expires worthless.