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Good morning,

I am trying to link the volatility surface to my swaption pricing engine.

swaptionVolMatrix = ql.SwaptionVolatilityMatrix(calendar, rollConvention, optionTenors, swapTenors, ql.Matrix(normal_vols),dayCountConvention, False, ql.Normal)
#Matrix is a 8x6 shape

swaptionVolHandle = ql.SwaptionVolatilityStructureHandle(swaptionVolMatrix)
swaptionVolHandle.enableExtrapolation()

I get the following error:

RuntimeError: BlackSwaptionEngine requires (shifted) lognormal input volatility here:

blackEngine = ql.BlackSwaptionEngine(discountingTermStructure, swaptionVolHandle)

I have tried to follow this from the documentation: enter image description here

Do I need to extrapolate manually first then? And insert just the quote value?

Thanks in advance!

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  • $\begingroup$ The error message says that the Black surface requires lognormal vols. You provide the argument ql.Normal when setting up SwaptionVolatilityMatrix. I think you simply need to change accordingly. $\endgroup$
    – Kermittfrog
    Nov 11, 2021 at 9:32
  • $\begingroup$ … and you must provide lognormal vols, of course $\endgroup$
    – Kermittfrog
    Nov 11, 2021 at 9:53

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