SDX Interest Rates Help > Supported Instruments > Swaption Collar Strategy

Swaption Collar Strategy

A swaption collar is a predefined strategy constructed from payer and receiver swaptions.

With a collar you can do either of the following:

Buy a receiver swaption and sell a payer swaption both with the same expiry but different strike prices and notionals.

Sell a receiver swaption and buy a payer swaption both with the same expiry but different strike prices and notionals.

For more information on a swaption (and how to price it and what points to consider) see Swaption.

Advantages of a Swaption Collar Strategy

A collar protects you from the risk of rising or falling interest rates as relevant while doing so at a lower cost than the equivalent purchase of a single swaption.