An investor who anticipates the need to exit a pay-fixed interest rate swap prior to expiration might:
A) buy a receiver swaption. B) buy a payer swaption. C) sell a payer swaption.
… and why?
Buy a Receiver swaption – right to receive-fixed & pay floating
This is one of the ways to offset both sides.
ok, ok … I mis-read that! I thought I have a payer swaption…I don’t. I have a pay fixed swap. I was going to say C: sell a payer swaption. Thanks.