What right does a putable swap give to the floating-rate payer?

A putable swap provides the floating-rate payer the right to terminate the swap agreement at specified points during its life. This feature is especially beneficial in a rising interest rate environment, as it allows the floating-rate payer to exit the swap if future floating rates are expected to be more favorable than the current swap rate.

With this right, the floating-rate payer can manage the interest risk better by opting out of the agreement if market conditions no longer suit their financial strategy. This flexibility can be crucial for entities managing cash flows tied to floating rates, as it allows them to respond proactively to shifting interest rate scenarios rather than being locked into a potentially unfavorable swap.

The other options do not accurately describe the specific rights associated with a putable swap. For instance, the notion of lowering interest rates, increasing payments, or switching to fixed rates does not directly align with the capabilities granted to the floating-rate payer within the context of a putable swap. Instead, the core benefit lies in the termination right, allowing the payer to capitalize on changing market conditions.