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…