How Does a 'Swaption' Function as a Hybrid Derivative Instrument? ⎊ Path

How Does a ‘Swaption’ Function as a Hybrid Derivative Instrument?

A swaption is an option on a swap. It gives the holder the right, but not the obligation, to enter into a specific interest rate or currency swap agreement on a future date.

It combines the features of an option (right, not obligation) with the underlying structure of a swap contract.

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Glossar

Swaption

Contract ⎊ A swaption, within the cryptocurrency derivatives landscape, represents an options contract conferring the holder the right, but not the obligation, to enter into an underlying interest rate swap at a predetermined future date and rate.

Decentralized Finance

Architecture ⎊ Decentralized Finance, or DeFi, fundamentally reimagines traditional financial infrastructure through blockchain technology, specifically leveraging smart contracts to automate and execute financial agreements without intermediaries.