0
$\begingroup$

Whats the issue if we try to price a swaption with a negative strike using Black model?

$\endgroup$
2
  • $\begingroup$ In this case, there is no optionality, and the valuation becomes trivial. $\endgroup$
    – Gordon
    Commented Jun 17, 2020 at 18:31
  • 1
    $\begingroup$ And mechanically, you will also have log of a negative number in the d_i's, so the calculator is going to scream. $\endgroup$ Commented Jun 17, 2020 at 18:41

0

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.