Book meme

[winter]

1. Grab the nearest book.
2. Open the book to page 123.
3. Find the fifth sentence.
4. Post the text of the next 4 sentences on your LJ along with these instructions.
5. Don't you dare dig for that "cool" or "intellectual" book in your closet! I know you were thinking about it! Just pick up whatever is closest.

A payer swaption gives the holder the right to enter a swap as the fixed-rate payer at the strike rate. The strike price on the swap is the fixed rate, so there is no exercise price per se. The payment for the swaption is the premium paid for purchase, just like any other options.

In the middle of the swap, credit quality of one of both parties can have deteriorated over time and there are still significant payments remaining.

In a frightening manner, Level II derivatives theory is easier than Level I. (And I'm well along with studying for my June exam. There may be more of such remarks.)

Comments

[wottie.livejournal.com]

Aw man, these memes always embarass me because I have stupid-sounding children's books on my desk all the time! Also, I totally just gave myself a headache trying to understand that sentence.

[winter]

Trust me, it can only be learned by heart, not understood ~_~ I'm basically learning why the banking crisis happened - because no-one can understand this theory even in the simplified version.