First time question, so please let me know if you have feedback for how I am asking.

I am reading a market research piece and it makes reference to the performance of "vol, particularly the upper left and low strike receivers".

I've poked around looking for information on what that means. My understanding is that the volatility surface has x-axis of time to maturity, y-axis of implied vol, and z-axis of strike price. Should I infer that the 'upper left' vol would mean high implied vol with low time to maturity?



In swaptions, there is the expiration of the swaption into an underlying swap. When the dealers provide the vol surface, in the first column, they typically put the expiry of the swaption from earliest to farthest. Along the top row, they put maturity of the underlying swap from shortest to farthest. So when the dealers describe the upper left having high implied vol, they are saying short dated/expiry options on short maturity underlying swaps have been going up.

Of course, some dealers might show the swaption maturity on the row and the underlying swap on the column, but this would yield the same interpretation of the upper left.

Below is a snapshot of swaption vol from bloomberg demonstrating this phenomenon.

enter image description here

  • $\begingroup$ Thank you, that's very clear. $\endgroup$ Jun 18 '19 at 19:24

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