A swaption is an option on a swap. There are two types of swaption:
1. A payer’s swaption: if you buy this option, it gives you the right (but not obligation) to enter into a forward starting swap where you pay fixed interest.
2. A receiver’s swaption: if you buy this option, it gives you the right (but not obligation) to enter into a forward starting swap where you receive fixed interest on a swap.
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