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Basic Question 8 of 12
Consider a European receiver swaption that expires in two years and is on a one-year swap that will make quarterly payments. The swaption has an exercise rate of 6.5%. The notional principal is $100 million. At expiration, the term structure of interest rates is as follows:
L0(90) = 0.0373; L0(180) = 0.0429; L0(270) = 0.0477; L0(360) = 0.0538.
What is the market value of the swaption at expiration?
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
describe how the Black model is used to value European options on futures;
describe how the Black model is used to value European interest rate options and European swaptions;
CFA® 2025 Level II Curriculum, Volume 5, Module 32.