Use the DerivaGem software to value 1x4, 2x 3, 3 2, and 4 1 European swap options to receive fixed and pay floating. Assume that the 1-, 2-, 3-, 4-, and 5-year interest rates are 6%, 5.5%, 6%, 6.5%, and 7%, respectively. The payment frequency on the swap is semiannual and the fixed rate is 6% per annum with semiannual compound- ing. Use the Hull-White model with a 3% and = 1%. Calculate the volatility implied by Black's model for each option.

AppendixLO1