LOS h: Calculate and interpret the value of an interest rate swaption on the expiration day.

Q1. The LIBOR yield curve is:

180-days	5.2%
360-days	5.4%

What is the value of a 1-year semiannual-pay LIBOR based receiver swaption (expiring today) on a $10 million 1-year 4.8% swap?

A)   $50,712.

B)   -$50,712.

C)   $0.

Q2. The London Interbank Offered Rate (LIBOR) yield curve is:

• 180-days: 5.2%.
• 360-days: 5.4%.

What is the value of a LIBOR-based payer swaption (expiring today) on a $10 million 1-year 4.8% swap?

A)   $50,712.

B)   ?$50,712.

C)   $0.

Q3. Cal Smart wrote a 90-day receiver swaption on a 1-year LIBOR-based semiannual-pay $10 million swap with an exercise rate of 3.8%. At expiration, the market rate and LIBOR yield curve are:

Fixed rate 3.763%
180-days 3.6%
360-days 3.8%

The payoff to the writer of the receiver swaption at expiration is:

A)   -$3,600.

B)   $0.

C)   $3,600.