Would anyone like to tell me, how to do the swaption with pay fixed rate receive floating rate with upfront Payer Swaption Exercise rate 5% Notional principal $10M L0(180)=0.0583 = Present Value Factors 0.9717 L0(360)=0.0605 = Present Value Factors 0.9430 L0(540)=0.0614 = Present Value Factors 0.9157 L0(720)=0.0651 = Present Value Factors 0.8848 Fixed rate = 0.062 If Pay fixed rate, receive fixed rate Upfront Fixed payment = $10m (0.062*180/360) = $310,000 Fixed payment = $10m (0.05*180/360) = 250,000 $310,000-$250,000(0.9717+0.9430+0.9157+0.8848) ANS= $222,912 Now question is changed from receive fixed rate to receive floating rate. Which one is correct or neither is correct ? $310,000 (0.9717+0.9430+0.9157+0.8848)-$291,500(0.9717) ? $310,000-$291,500 ( 0.9717+0.9430+0.9157+0.8848) ?
Did not understand your question, or may be it’s friday night… so!