First, find the discount factors. 1/(1+(0.052×(180/360))) = 0.97465887 and 1/(1+(0.054×(360/360))) = 0.94876660 Calculate the market fixed rate payments: (1 - 0.94876660) / (0.97465887 + 0.94876660) = 0.026637 and compare to the exercise rate payments 0.024. The value of the receiver swaption is zero since the exercise rate is below the market rate. |
