I'm wondering what is the best swaptions or caps portfolio I could use to calibrate the two parameters of H&W 1F model for a structured note with optionality on Libor underlying.

Let's suppose for example that the EUR trade I want to price is paying a coupon = Notional * max(Libor EUR 3M + spread, 0) each year, and consider as maturity 31/12/2030 where the Notional is paid.

My first thought would be to use a portfolio of Caps but then I would have to choose the appropriate dates and strikes (ATM?), and it's where it gets tricky. Furthermore, it seems that the EUR Caps vols/prices are quoted for EURIBOR 6M underlying, not 3M.

Need help!! Thanks! Samuel



Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Browse other questions tagged or ask your own question.