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


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