Credit swaption

An option on a credit default swap. Credit swaptions allow traders to take a view on the volatility as well as the direction of credit spreads.

Swaption types- Receiver swaptions give the option buyer the right to receive premium, that is, to sell protection, on a certain date at a certain price. Payer swaptions give the option holder the right to pay premium, that is , to buy protection, on a certain date at a certain price. This terminology is the same as that used in the interest rate swap option market where the premium on the credit default swap is the equivalent to the fixed leg of the interest rate swap.

See payer, receiver.