# Payer swaption like a put

Can someone break this down to me? I was reading it on the train this morning and the formula makes it look more like a call imo

Maybe this is correct:

A payer swaption allows you to enter a swap as the fixed rate payer. You will profit when rates rise as you pay less than you receive.

A put option will allow you to profit as rates rise, as the underlying gets cheaper and as a put holder you move into the money…

Thanks - that certainly sounds logical. Can anyone confirm this is correct and i will plant it into my memory?

both statements are correct

It depends on what you mean by a “put” and a “call”.

If you mean options on bonds, then a payer swaption does, indeed, act like a put option: if interest rates rise you would exercise a payer swaption and make a profit, and if interest rates rise bond prices fall, so you would exercise a put option on bonds and make a profit.

If you mean options on interest rates, then a payer swaption acts like a call option: if interest rates rise you would exercise a payer swaption and make a profit, and if interest rates rise you would exercise a call option on interest rates and make a profit.

^ Exactly , here I presumed options on bonds , well put

so why is it that the payoff formula for the payer swaption looks like the formula for a call and not a put

ie. max (o, FS(o,n,m) - x) sum bo(hj)

See post #5, above.