1. 

   Benjamin Member

   Hi,
   
   Could you please explain the mechanics underlying the comment in the CMP (Ch3, p.24, bottom):
   
   

   "Equally, swaptions can be used to place a limit on a floating rate by providing the company with the option to swap that floating rate for a fixed one."​

    

   Benjamin, Mar 24, 2018

   #1
2. 

   Simon James ActEd Tutor Staff Member

   A swaption is an option to enter into a swap, so if you have a floating rate loan plus a swaption, you can enter into a swap to exchange your floating payments for fixed (thereby "limiting" your floating rate).

    

   Simon James, Mar 26, 2018

   #2

   Benjamin likes this.
3. 

   Benjamin Member

   Ah yes, makes sense

    

   Benjamin, Mar 26, 2018

   #3

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