Quick formula to calculate SWAPTION on Mock 2012 2012, index, increase, anything, especially

bchadwick

Normally to calculate swap I would go step by step, PV of fixed payment , PV of floating payment
In question 43 to calculate RECEIVER SWAPTION, can anyone please explain the rationale for it, especially why they subtract 0.969 from return of index (15%)?
P/S: Do you usually do quick way like this or you would go step by step to make sure you dont miss anything ( but chance of mistake increase)

kasinkei

Oh thanks. But I thought equity return is considered Floating rate?

needhelp1700

oh ok, i meant that there wasn’t the traditional floating thing, it was an equity return.
The equity return is just the fraction, nothing else, just the single term