A swaption (a portmanteau of "swap" and "option") is an option granting its owner the right but not the obligation to enter into an underlying swap on specified terms at a future date. In practice the term is most commonly used for options on interest rate swaps, where the holder has the right to enter into a fixed-for-floating interest rate swap.

Swaptions are traded over the counter between institutions and are used by banks, insurance companies, corporations and others to manage interest rate risk or to take speculative positions on future interest rates.

</references>

  • Mittelmark, Maurice B. December 2008. Promotion & Education becomes Global Health Promotion. Promotion & Education, 15 (4), pp.&nbsp;1–3, doi 10.1177/1025382308097691
  • Longstaff, Francis A., Pedro Santa-Clara, and Eduardo S. Schwartz. The Relative Valuation of Caps and Swaptions: Theory and Empirical Evidence.
  • Blanco, Carlos, Josh Gray and Marc Hazzard. Alternative Valuation Methods for Swaptions: The Devil is in the Details.
  • Basic Fixed Income Derivative Hedging. Financial-edu.com.
  • Martingales and Measures: Black's Model Dr. Jacqueline Henn-Overbeck, University of Basel
  • Black-Scholes and binomial valuation of swaptions (Advanced Fixed Income Analytics 4:5), Prof. D. Backus and Prof. S. Zin, New York University Stern School of Businesses