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The underlying is clearly the 10-year tenor payer swap. The underlying is - initially - the 10y swap, 5y forward. In a year from now, it will be the 10y swap, 4y forward (etc).


Any reason why you want the valuation using Monte Carlo instead of trees? Here is an example using python. After you setup you swaption: import QuantLib as ql calendar = ql.TARGET() today = ql.Date().todaysDate() yts = ql.YieldTermStructureHandle(ql.FlatForward(today, 0.01, ql.Actual360())) exerciseDate = calendar.advance(today, ql.Period('5y')) exercise = ...

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