Strike Rate vs. Swap Fixed Rate: What The Numbers Reveal

Understanding receiver swaption valuation at expiration can unlock smarter decisions in fixed income strategy. Learn how to calculate its payoff and present value with precision.

This video looks into the valuation of a receiver swaption at its expiration.

If the strike price on the swaption surpasses the swap fixed rate, the holder will execute it, securing a greater cash flow per period. This additional cash flow hinges on the disparity between the strike rate and the swap fixed rate.

The formula for the payoff on each swap payment is provided, underscoring that the swaption holder will only exercise it if the strike rate exceeds the swap fixed rate.

The present value of all payoffs from the receiver swap at expiration is determined by summing the payoffs from each payment period.

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Видео Strike Rate vs. Swap Fixed Rate: What The Numbers Reveal канала Frugal Finance