标题: receiver swaption and call option on a bond [打印本页] 作者: DarienHacker 时间: 2011-7-13 17:15 标题: receiver swaption and call option on a bond
Hi, all.
R43 P.519 CFAI
"A receiver swaption is equivalent to a call option on a bond."
the right to receive fixed is equivalent to the right to buy back a bond for the issuer???
Anyone can explain the concept?
Thanks in advance!作者: Darien 时间: 2011-7-13 17:15
Right to receive Fixed happens when the Strike rate > Fixed Rate of the Swap on which the option (Swaption) is created. This would be when the Rates are increasing.
Call Option on a Bond - Issuer has the Right to call the bond - when the rates increase so as to make issuance of a new bond cheaper in the new regime - and then it makes sense for the Issuer to retire the existing bond and issue a new one at the lower rate.
So both of these are similar...
CP作者: infinitybenzo 时间: 2011-7-13 17:15
Bond prices have inverse relationship with interest rates. A call option holder on bonds makes money when interest rates decrease.
A fixed rate receiver (floating rate payer) in a swap also makes money with decrease in interest rates.
A receiver swaption gives the right to enter into a swap with a right to receive fixed interest rate.作者: Iginla2011 时间: 2011-7-13 17:15
I seem to have written something wrong... was writing this from memory. I have not yet reached this section. so if I am wrong, please ignore.
CP作者: zwjy 时间: 2011-7-13 17:15
Thanks, cpk123, mitchells, FinNinja !!
All explanation is helpful!!
thanks again.作者: strikethree 时间: 2011-7-13 17:15
Another good one.
Is the receiver swaption like a interest rate put option?作者: Analyze_This 时间: 2011-7-13 17:15
deriv108 Wrote:
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> Another good one.
>
> Is the receiver swaption like a interest rate put
> option?
Yes. You will benefit from a drop in interest rates for both these instruments.
