I have seen a lot of literature regarding the valuation of physical Bermudan Swaptions.
However, I could not find any answer to the following question: if you're a trader and an expiry date is approaching, how do you know if you exercise now or not?
I don't think that it is just by checking if the underlying swap value is bigger than the continuation value (which is the criteria used in valuation models). Here's why with two examples:
Let's imagine you have an expiry frequency of 6 months. I expect the volatility of the remaining Swaptions to almost always compensate for the next coupon except for extreme case.
If the expiry frequency is every 5 years for instance, I cannot believe that a trader would not exercise by strictly applying this criteria without considering the magnitude of the difference between the two figures.
Thanks for your help