Option to enter an interest-rate swap at a future date — payer swaption gives the right to pay fixed (call on rates), receiver swaption the right to receive fixed (put on rates). European swaption price under the annuity measure follows Black's formula with the par swap rate as the underlying: V = A(0),[S_0,N(d_1) - K,N(d_2)], where A(0) = sum_i τ_i,P(0,T_i) is the annuity. Bermudan/American extensions priced by tree or LSM Monte Carlo. The dominant rates-volatility instrument — swaption-vol matrix is the analogue of the equity vol surface.