Plot the payoff diagrams fur the following instruments (a) A caplet with cap rate Rcap 6 75 written on 3 wonth Libor Lt, that is about to expire (b) A forward contract written on a default free discount bond with maturity 2 years The forward contract expires in 3 months The contracted price is 895 (c) A 3 by 6 FRA contract that pays the fixed 3 month rate, F, against Libor (d) A fixed payer interest rate swap with swap rate k 7 5 The swap has maturity 2 years and receives 6 month Libor Start date was exactly 6 months ago (e) A swaption that expires in 6 months on a 2 year fixed payer swap with swap rate k 6

Question: Plot the payoff diagrams fur the following instruments: (a) A caplet with cap rate Rcap = 6.75% written on 3-wonth Libor Lt, that is about

Plot the payoff diagrams fur the following instruments:

(a) A caplet with cap rate Rcap = 6.75% written on 3-wonth Libor Lt, that is about to expire.

(b) A forward contract written on a default-free discount bond with maturity 2 years. The forward contract expires in 3 months. The contracted price is 895.

(d) A fixed payer interest rate swap with swap rate k = 7.5%. The swap has maturity 2 years and receives 6-month Libor. Start date was exactly 6 months ago.

(e) A swaption that expires in 6 months on a 2-year fixed payer swap with swap rate k = .6%.

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