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PRMIA Exam 8006 Topic 4 Question 47 Discussion

Actual exam question for PRMIA's Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition exam
Question #: 47
Topic #: 4
[All Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition Questions]

A receiver option on a swap is a swaption that gives the buyer the right to:

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Suggested Answer: B

A swaption is an option to enter into a fixed for floating interest rate swap at a point in the future, with the fixed rate decided upfront. These options can be European, Bermudan or American, in terms of what dates the option can be exercised. A receiver option on a swap is an option that gives the buyer the right to enter into a swap and receive the fixed rate and pay the variable rate. In the case of a payer option, the buyer pays the fixed rate and receives the variable rate. One way to remember this is that receiving and paying are terms used with reference to the fixed rates.


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