Fixed Income: Interest Rate Futures

Question 1

Calculate the payoff on an interest rate floor

Answer 1

Floor Payoff = Principle X (Floor rate - Market rate)

Question 2

Definition of a Swaption

Answer 2

The option to enter into an interest rate swap

Question 3

Payer Swaption definition

Answer 3

Allows buyer to enter into a swap as the fixed rate payer/ variable rate reciever

Question 4

Receiver Swaption definition

Answer 4

Allows buyer to enter into swap as fixed rate receiver and floating rate payer