Show that the value of the swaption S (T) is equal to the value of the cash flow of call options T R(T) paid at times t T1, , Tn, where R(T) is the swap rate at time T, for the swap starting at t T and maturing at t Tn

Question: Show that the value of the swaption S+(T) is equal to the value of the cash flow of call options T[R(T) ]+ paid at times

Show that the value of the swaption S+(T) is equal to the value of the cash flow of call options ΔT[R(T)− ]+ paid at times t = T1,. . . , Tn, where R(T) is the swap rate at time T, for the swap starting at t = T and maturing at t = Tn.

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