A swaption is an option to enter into a swap transaction at a specified future date, with the terms of the swap being fixed at the time the swaption is transacted. A swaption may be an option to enter into an agreement to exchange a fixed interest rate on a loan with a floating interest rate on a loan. However, a swaption is not the agreement to do so.
An agreement to exchange a fixed interest rate on a loan with a floating interest rate on a loan is not an interest rate guarantee.
An interest rate swap takes place when two parties exchange interest payments, one at a fixed rate and one at a floating (or variable) rate that is pegged to some sort of market rate of interest and changes whenever the market rate changes. The primary purpose of an interest rate swap is to match the characteristics of the firm's revenue stream with the characteristics of its payment stream. For example, if a firm has a revenue stream that increases or decreases with the market rate of interest, it would want its payment stream to also increase or decrease with interest rates. If the firm has a fixed rate loan, swapping the fixed rate loan for a floating rate loan would achieve this goal, and reduce the firm's overall risk.
A basis swap has is an interest rate swap with floating payments on both sides, each tied to two different indexes. So a basis swap does not involve a fixed interest rate on one side.
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