In a receiver and payer swaption Black anticipate interest rate decline and wants to profit from that, which position should he take as a Payer receiver a. short short b. long short c. short long explain your answer propery.
anticipates rate decline receiver = take long (receive fixed leg) payer = take short (pay variable leg) c. short long
C Payer option becomes less valuable as interest decline. The opposite if true for receiver.