Solution-What trade should be implemented

What trade should be implemented

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Reference no: EM132460073

Problem: An investor anticipates that Rates will go down in the next 6 months and wants to position itself through a swaption on the 10 years swap.

EURO swap 10 years trades at 0,75% with a DV01 of 0,10%

Receiver and Payer 6 months Strike 0,75% are worth 1,5%

1. What trade should be implemented?

2. What is the yield breakeven of the strategy?

3. Draw the pay-off of the strategy (x-axis: swap rate from 0,25% to 1,25% increment of 0,10%, y-axis: P&L in cents)?

Reference no: EM132460073

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What trade should be implemented

Reference no: EM132460073

Reference no: EM132460073

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