Compute the initial price of a swaption that matures at time t =5 and has a strike
Fantastic news! We've Found the answer you've been seeking!
Question:
Compute the initial price of a swaption that matures at time
t =5 and has a strike of 0. The underlying swap is the same swap as described in the previous question with a notional of 1 million. To be clear, you should assume that if the swaption is exercised at
t =5 then the owner of the swaption will receive all cash-flows from the underlying swap from times
t = 6
t =6 to
t = 11
t =11 inclusive. (The swaption strike of 0 should also not be confused with the fixed rate of 4.5% on the underlying swap.)
Related Book For
Fundamentals of Investment Management
ISBN: 978-0078034626
10th edition
Authors: Geoffrey Hirt, Stanley Block
Posted Date: