Particularly for floating LIBOR, are they always settled next period?

When would you base the option payoff based on current LIBOR?

Particularly for floating LIBOR, are they always settled next period?

When would you base the option payoff based on current LIBOR?

LIBOR is an interest rate . Interest is payable only upon maturity or when you reach the term . That applies to options too , where you your payoff is an interest rate. Its still an interest on a loan that is payable upon maturity , You may settle using a present value calculation which uses the rate and the future value to calculate the payoff today , but that is just a way to settle it. The terms of the loan would still say that the loan and and the interest are payable upon maturity or term