What do swaptions provide to the owner?

Swaptions, or swap options, are financial derivatives that give the holder the right, but not the obligation, to enter into a swap agreement at a predetermined future date and at predetermined terms. This flexibility is a key characteristic of swaptions, which allows the owner to manage interest rate exposure or capitalize on favorable market conditions without the commitment to execute a swap contract.

In contrast, other options may imply certain obligations or effects that do not align with the nature of a swaption. For example, obligations to enter or make certain payments are not attributes of a swaption; instead, the instrument is designed specifically to offer optionality to the holder. Therefore, the correct choice accurately reflects the essence of what swaptions provide to their owners.