I have a question from Coursera Financial Engineering class
n=10-period binomial model for the short-rate The lattice parameters are: r(0,0)=5% u=1.1 d=0.9 q=0.5 1−0.5
Compute the initial price of a swaption that matures at time t=5 and has a strike of 0. The underlying forward starting swap begins at t=1, with maturity t=10 and fixed rate of 4.5%. (assume notional is $1M and you receive floating and pay fixed) Underlying forward starting swap is equal to 33,374