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What is exercise

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    Benton Li
    Twitter

Definition: exercise means that you are “redeeming” your option at the strike price/rate.

Specifically:

For call/put options, exercising means buying/selling the specified assets at the strike price.

For cap/floor options, exercising means receiving a payment based on a floating rate beyond/below the specified strike rate.

For swaptions, exercising means entering the swap contract.