What does Put Swaption mean?
A Swaption is an option to enter into an interest rate swap. In such a scenario, the buyer gains rights to enter into a specified swap agreement on a specified future date, without the obligation. In a Put Swaption, the buyer of the option has the right to enter into an interest rate swap as the payer of the fixed rate and the receiver of the floating rate. Thus, the seller is the receiver of the fixed rate and the payer of the floating rate.
Futures Knowledge Explains Put Swaption
In put swaption strategy, the buyer of the option expects interest rates to rise and is hedging against this possibility, while the seller of a put swaption expects interest rates to fall. Generally, large corporations or financial institutions would enter into such an agreement.