21.17. Suppose that risk-free zero rates and LIBOR forward rates are as in Problem 21.14. Use DerivaGem
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21.17. Suppose that risk-free zero rates and LIBOR forward rates are as in Problem 21.14. Use DerivaGem to determine the value of an option to pay a fixed rate of 6% and receive LIBOR on a five-year swap starting in one year. Assume that the principal is $100 million, payments are exchanged semiannually, and the swap rate volatility is 21%.
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