The buyer of a put swaption expects interest rates to rise and is hedging against this possibility, while the seller of a put swaption expects interest rates to fall.

Settlement of swaptions is usually on a cash basis.

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Swaption market participants are generally large companies and financial institutions. As an example, consider an institution that has a large amount of floating-rate debt and wishes to hedge its exposure to rising interest rates.

Options, swaps, futures, MBSs, CDOs, and other derivatives | Khan Academy

By buying a put swaption, the institution converts its floating-rate liability to a fixed-rate one for the duration of the swap. Should interest rates rise as anticipated, the company will receive the difference between the rates in cash on each date on which debt repayment is due.

Swaption - Wikipedia

Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

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Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Also known as a payer swaption.

Fuel Hedging: Swaps + Put Options = Call Options

Swaption Swap Option Interest Rate Swap Putable Swap Black's Model Bond Market Association BMA Swap Interest-Rate Derivative Liability Swap Rate Anticipation Swap Asset Swap.

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