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Longevity swaption

\lɔnˈʤɛvəti\ swaption

A longevity swaption is a derivative contract allowing the owner the option (the right but not the obligation) to enter into an underlying longevity swap.

With a defined floating leg and fixed leg of the underlying longevity swap,

  • A swaption that allows the original payer of the floating leg the option to pay the fixed leg and receive the floating leg is known as a payer swaption or put swaption.
  • A swaption that allows the original payer of the fixed leg the option to pay the floating leg and receive the fixed leg is known as a receiver swaption or call swaption.
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