An option that confers to its holder the right to enter into a specific type of swap transaction at or by a pre-determined expiration date as either a payer or receiver of the fixed interest rate. Some types of swaption incorporate a forex component that can be used by a hedger to protect a series of cash flows in a currency other than their domestic currency.

Related Terms

 • Call Swaption  • Black's model  • Put Swaption