LIBOR based interest rates are derived from the prices (supply / demand) of swaptions, caps and floors.
These prices are generally quoted in yield vols. Their prices are given by the Black formula.
The Black formula assumes the same yield vol. for all ATM and OTM strikes. However, this is a faulty assumption.
What is the process in determining the OTM and ATM volatility skew for a LIBOR market model?