The payoff of a long interest rate floor is equivalent to the payoff of a short receiver swaption.

Name: The payoff of a long interest rate floor is equivalent to the payoff of a short receiver swaption.
Brand: Quizplus
Rating: 4.8 (33 reviews)

Question

Quizplus · Accepted Answer

A long interest rate floor provides a payoff when interest rates fall below a certain level, while a short receiver swaption gives the holder the right to enter into a swap where they receive fixed rates, which benefits from rising rates. These are opposite positions.

The Payoff of a Long Interest Rate Floor Is Equivalent