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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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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.