This is a repost from a post at the General Forum. Due to lack of answers, I thought it would be more suited to this sub-forum. There is a swap between counterparties A and BTenor = 10yTrade Date = TStart Date = T+6mEnd Date = T + 10y 6mPayments = Annually, act/360 from T + 1y6m onwardsA pays: X% p.a.A recs: (Underlying at Payment Date / Underlying on Start Date -1) / N , where N = 1, 2, 3 .. 10 for the 10 payments (just to annualize)Underlying is like an equity/an index that moves with a constant forward and a constant vol (pure black scholes kind of behaviour), with forward F% p.a. and vol V% p.a.X% is determined so that the swap is at par when tradedOptionA also buys the option from B on date T, whereby A has the option to cancel the Swap (above) at no cost on T + 3m (i.e. before any underlying fixing is done in the swap)Am I right in saying that the price of this option (i.e. the option premium) is zero? Or will it be some number that will decide on the times 3m, 6m, and F%, V%?Thanks very much