标题: Please explain this statement [打印本页] 作者: parott 时间: 2011-7-13 15:55 标题: Please explain this statement
A receiver swaption is equivalent to a call option.作者: cv4cfa 时间: 2011-7-13 15:55
receiver swaption = right to receive fixed-rate = valuable if interest rate falls = call option on bond作者: SpyAli 时间: 2011-7-13 15:55
it is equivalent to a call option on a bond because they both benefit when interest rates fall. in a receiver swaption, you pay floating and receive fixed, therefore your betting on rates to fall.
similarly in a call option in a bond , you are betting that interest rates will fall, hence you get to buy the bond at cheaper price. remember that the price of bonds and interest rates are inversely related.作者: ryanlb 时间: 2011-7-13 15:55
that's it right there. I just packed that freakin' statement and locked it on the right side of my brain until Saturday at 4:05PM.作者: b_sea93 时间: 2011-7-13 15:55
but if u r receiving floating, won't you be getting less money when interest rate falls? And you'll be paying a fixed rate that would be higher than the lower interest rate? How's that what you want?作者: redskins44 时间: 2011-7-13 15:55
No it's the right to receive fixed not floating so you would benefit if the interest rate falls. You would pay a cheap rare and receive a high rate作者: BelalM 时间: 2011-7-13 15:55
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Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 02:13AM by Damil4real.作者: jarobi04 时间: 2011-7-13 15:55
canadiananalyst Wrote:
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> No it's the right to receive fixed not floating so
> you would benefit if the interest rate falls. You
> would pay a cheap rare and receive a high rate
oh yeah, my bad.作者: 5566 时间: 2011-7-13 15:55
the confusion for me in this problem which i think you got from either schweser or stalla, is it doesn't say a call option on a bond or on rates. They would specify on the test i believe.作者: RMontgomery 时间: 2011-7-13 15:55
They won't...they want you to figure out what makes sense. Only call on bond will make sense here.作者: Rasec 时间: 2011-7-13 15:55
I agree, they don't need to give extra details when the answer is possible to find without them...as well the answers are most likely given the information given...no need for irrelevant information作者: YAhmed 时间: 2011-7-13 15:56
Dreary - it's correct. Call option on bond means you get to buy the bond at a cheaper price. If the rate is below the coupon, the bond should be traded at a premium. If you have a call option, you could buy it for a lower price.
AndrewUNH - Think of swaps as two bonds. The receiver swap holder buys a fixed paying bond and pays a float-rate bond in return.作者: ayodayo 时间: 2011-7-13 15:56
my bad, I read his reply as if he was saying that the bond price will be lower/cheaper, but you said it right, nicely too: receiver swaption = right to receive fixed-rate = valuable if interest rate falls = call option on bond
