Interest rate risk will come through the discount factor...(swap value will be impacted)

Hi, can anybody answer my question?

As per Wiki http://en.wikipedia.org/wiki/Black_76, discounting will be as per T' (forward expiry day) instead of option expiry day (T) (T' > T) because underlying is forward

Do you get analytical solution to spot exchange rate dynamics with stochastic interest rates? Please provide me reference... standard textbooks have provided analytical solution to GBM spot exchange rate dynamics under constant drift..........

<t>In spot exchange rate modeling with Geometric Brownian Motion (GBM), the drift term is interest rate differential...Many practitioners while computing PFE for a portfolio with interest rate and currency swap, model exchange rate with constant drift (rd-rf), but uses stochastic interest rate model...

<t>Alternative way is to compute E (P(t,T)) {E refers mathematical expectation at time 0} for different (t,T) combination. Compute forward interest rate R(t,T) from the zero coupon curve for those (t,T) pairs. Minimize Sum over (t,T) [Exp(-R(t,T)(T-t))- E (P(t,T))]^2This solution will choose vasicek...