why payer swaption = put?

CFA Level II
#1

when rate increase, you gain, why the hel it is equal to a put??

#2

Where’d you see that?

#3

i would think that a payer swaption is more like an interest rate call option, with the fixed rate being the payer swaption fixed leg rate

#4

i guess you could say it’s a “put” meaning you can “put” a fixed interest rate??

#5

supersharpshooter Wrote: ------------------------------------------------------- > i would think that a payer swaption is more like > an interest rate call option, with the fixed rate > being the payer swaption fixed leg rate +1 OP Please post more

#6

They are referring a payer swaption as a put on the bond price. Bond prices and yields are inverse, so a payer swaption benefits when rates go up (like a call option on the rates), or stated differently, a payer swaption benefits when the underlying bond price goes down (and conversely, rates go up). That means a payer swaption is like a put on the underlying bond prices.

#7

ahh it’s a put on a bond, makes sense, thanks mp2438

#8

I agree with you guys, UNTIL I read the section on CFAI CURRICULUM, I read it a couple of times just make sure I didn’t get it wrong, but true, it says PUT and didn’t give straight reasons I will have to read another tens of pages to find out why

#9

ndzhai Wrote: ------------------------------------------------------- > I agree with you guys, UNTIL I read the section on > CFAI CURRICULUM, I read it a couple of times just > make sure I didn’t get it wrong, but true, it says > PUT and didn’t give straight reasons > > I will have to read another tens of pages to find > out why a put on what…