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Compute the initial price of a swaption that matures at timet 5t5 and has a strike of

Compute the initial price of a swaption that matures at timet = 5t=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 att = 5t=5 then the owner of the swaption will receive all cash-flows from the underlying swap from timest = 6t=6 tot = 11t=11 inclusive. (The swaption strike of 0 should also not be confused with the fixed rate of 4.5% on the underlying swap.)

Submission Guideline: Give your answer rounded to the nearest integer. For example, if you compute the answer to be -220,432.23, submit -220432.

Jan 31 2020 View more View Less

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