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1answer
27 views

SABR Calibration: Normal vs Log-Normal Market Data

This question is about getting some clarification as to how to understand market quotes for normal & log-normal vols together with certain model assumptions. So let us define ...
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0answers
165 views

American Swaption Heding with Malliavin Calculus

Hedging American Swaption Hello, I priced an American swaption using Black model with swap rates diffusion to find the european (call) price at t. $$ C_t = (\delta \sum_{j=n+1}^{M+1} ...
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0answers
164 views

Weighted average implied optionlet/swaptions volatility

Let an implied volatility curve/surface is made up by optionlets or swaptions Black's implied volatility. If you wanted to price, say, a FRN with cap and/or floor, a CMS et cetera you would input the ...
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0answers
65 views

Price 3m libor autocap with LMM calibrated on 1y swaption data

I need to calculate a price of an autocap contract which is An autocap is similar to a cap, but at most γ ≤ β caplets can be exercised, and they have to be automatically exercised when in the ...
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0answers
137 views

American Swaption Pricing with PDE discretization

So I am still trying to price an american swaption. (MC approach here: American Swaption Pricing with Monte-Carlo method) I've found in Paul Wilmott, The mathematics of financial derivatives, a PDE ...
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0answers
109 views

Recalibrating SABR parameters for Swaption ATM volatility

I understand that the ATM volatility of Swaption moves quite frequently and the SABR will need to be recalibrated. Which parameter should I recalibrate? Is there any financial meanings why we only ...
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0answers
12 views

Accuracy Rebonato Swaption Approximation Formula among Different Strikes

Can somebody explain me if the Rebonato swaption volatility approximation formula is accurate for only ATM strikes, and if yes why? Can it also be used for ITM and OTM strikes? My foundings: Let $0 ...
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0answers
41 views

Normal Black&Schole model for swaptions isn't working properly

I just wrote two functions in Matlab which calculates the swaption prices based on the Lognormal model and on the Normal model, although I have the idea that the Normal model is wrong because the ...
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0answers
59 views

BDT model calibration using swaptions

I am using the Black-Derman-Toy model in a binomial tree that lasts 5 years with time increments of 1/12 . I have to calibrate my model using swaptions but I don't know which maturity I should use. I ...
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0answers
275 views

Calibration Problem in the LMM-Skew (Shifted Diffusion) Model

I have implemented the LIBOR market model (LMM) and I am quite satisfied with the results. I have now added a skew to the model as described in 10.1 of Brigo/Mercurio. That is, I have replaced the SDE ...