Analyze_This

When you buy a receiver swaption, you have paid a premium for it.

When interest rates go down, you would not want to pay the 8% on the coupon. So you exercise the swaption. Cash flows:

Pay 8% on bond
Receive 8% of fixed side of swap
Pay LIBOR (which has gone down)

NET: Pay LIBOR.

When interest rates go up, you are quite happy that you only have to pay 8%. So you do not exercise the swaption. Cash flows:
Pay 8% on bond.