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Swaption
Product Characteristics
- Swaption refers to the option of using the “Interest Rate Swap (IRS)” as the trading subject matter. After the buyer of option pays premium to the seller, the buyer acquires the right of option according to the agreement, and at a certain maturity date in the future, when the market benchmark interest rate is favorable to the buyer, the buyer has the right to request the seller to perform the trading of “interest rate swap (IRS)”.
Product Type
- Payer's Swaption
It refers to the right granted to the buyer of option to perform “pay at a fixed interest rate, receive floating interest rate swap contract” within a certain time-limit in the future. - Receiver's Swaption
It refers to the right granted to the buyer of option to perform “receive at a fixed interest rate, pay floating interest rate swap contract” within a certain time-limit in the future.
Use Timing
- Through operation of swaptions, it is able to assist the buyer that during the acquisition of options upon paying the premium, the interest rate level of the fund cost or income within a certain period in the future can be locked in, in order to prevent loss when the interest rate is unfavorable to the buyer in the future.
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