Interest rate call

A long interest rate call and a short interest rate put is an equivalent position to:

A) a long position in a forward rate agreement. B) a pay-fixed interest rate swap. C) a short position in a forward rate agreement.

Your answer: C was incorrect. The correct answer was A) a long position in a forward rate agreement.

I understand why A is correct. But why is B not correct also? The person payng fixed in the interest rate swap gets more if the interest rates go up…

You’re correct.

Stupid question.

I would say, B is incorrect, because a single swap is a series of payments whereas a single forward or a combination of Call/Put results in only one payment?

Although it’s unlikely, I don’t see any reason that you couldn’t have a one-period swap.

However, as swaps generally (99-44/100% of the time) have more than one payment, I’d agree and go with A.