What is the value of the underlying swap cash settlement in a swaption where strike is K, market swap rate is S, yearly payments and maturity of swap is M?
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V=max([1-d(0,T)-k*sum(d(0,t))]*N , 0)
V=max([(1+k)*d(0,T)+k*sum(d(0,t))-1]*N , 0)
d(0,t)=discount rate (0,t).
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