A putable swap provides the party making the floating rate payments with right to terminate these swaps. A putable swap allows the institution to terminate the swap in the event that interest rates rise. As with callable swaps, the party given the tight to terminate the swap pays a premium. For putable swaps, the premium is reflected in a higher floating rate than would be paid without the put feature. The party may also incur a termination lee in the event that it exercises its right to terminate the swap arrangement.
Definition