Long Callable Bond
“…being long a callable fixed-rate bond can be viewed as being long a straight fixed-rate bond and short a receiver swaption.”
(Institute 405) Institute, CFA. 2018 CFA Program Level II Volume 5 Fixed Income and Derivatives. CFA Institute, 07/2017. VitalBook file.
(1) How does one explain a short position on a receiver swaption? Does it mean I do not receive the fixed rate because I am short on it?
(2) How does a short position on a receiver swaption create or assist in creating the feature of the fixed-rate bond being callable?
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