What is 'Call Swaption'

A type of option between two parties that can be exercised on a swap where the buyer of the swap has the right, but not obligation, to receive an agreed upon fixed interest rate. The buyer pays a premium for the right to swap at this fixed rate. Short for a call swap option, a call swaption can be used as a hedging tool to avoid risk if a bond issuer believes interest rates might decrease.

Explaining 'Call Swaption'

When a buyer feels it will be beneficial, he may enter into a call swaption, which will allow him to swap interest rates. The buyer of the option receives a fixed rate, compared to a put swaption where the buyer pays a fixed rate.

Further Reading

Credit default swaptions
jfi.pm-research.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …

Throwing away a billion dollars: The cost of suboptimal exercise strategies in the swaptions market
www.sciencedirect.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …

On the suboptimality of single-factor exercise strategies for Bermudan swaptions
www.sciencedirect.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …

Pricing European commodity swaptions
www.tandfonline.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …

An evaluation of multi-factor CIR models using LIBOR, swap rates, and cap and swaption prices
www.sciencedirect.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …

Riding the swaption curve
www.sciencedirect.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …

Pricing swaptions within an affine framework
jod.pm-research.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …

Optimal bank interest margin with synergy banking under capital regulation and deposit insurance: a swaption approach
www.worldscientific.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …

Swaptions and options
papers.ssrn.com [PDF]
… the issuer holds, the issuer can arbitrage volatility by buying cheap (low-volatility) embedded calls and then … If the under- lying swap is a long fixed-pay swap combined with a call swaption (receiver swaption … A cap is a series of options, whereas a swaption is one discrete option …